Dollar Slips as Markets Price In December Fed Cut; Sterling Eyes UK Budget, GBP/USD Tests 1.32
The dollar weakened broadly after softer U.S. private payrolls and fresh dovish cues on policy, propelling GBP/USD toward 1.32 as traders shift focus to the UK’s Autumn Budget and U.S. jobless claims ahead of a thin-liquidity Thanksgiving session.
Fed Cut Bets Firm as Data Softens, Yields Ease
The greenback extended losses after a soft ADP employment print and a Bloomberg report suggesting Kevin Hassett has emerged as a frontrunner for the next Federal Reserve Chair. The move added to downside pressure that began late last week when Fed Vice Chair John Williams endorsed the case for a December rate cut.
Interest-rate swaps now imply roughly a 76% probability of a cut at the December FOMC meeting, making a policy move the base case for many traders. Absent major data before the decision, incremental signals—like today’s initial jobless claims—may nudge the dollar intraday, but the broader narrative hinges on the FOMC, then the subsequent NFP and CPI prints that will shape the early-2025 path.
Treasury yields have drifted lower alongside the dollar, and FX volatility remains subdued into the holiday, a setup that can magnify moves if data surprise into thin liquidity.
UK Focus: Autumn Budget and Dovish BoE Path
Sterling’s advance has been driven more by dollar softness than domestic tailwinds. UK OIS markets price about an 85% chance of a Bank of England cut in December and roughly 61 bps of easing by end-2026 following a run of softer UK activity and inflation data.
The Autumn Budget is the immediate risk event for GBP. Any shifts in fiscal stance, tax thresholds, or spending profiles could influence gilt issuance expectations, risk sentiment, and the BoE’s easing trajectory. A more expansionary tilt could steepen gilts and complicate the BoE’s path; a tighter stance may help anchor term premia and support the currency on the margins.
GBP/USD Technical Outlook
Daily chart
GBP/USD has broken above its descending trendline and extended toward the recent swing high near 1.3215. Sellers may lean into this resistance with tight risk defined above the high, while a daily close through 1.3215 would open a push toward the 1.3300 area where offers are likely to cluster.
4-hour chart
A minor ascending trendline is guiding the short-term uptrend. Pullbacks toward that line are likely to attract dip-buying interest with risk set just below, targeting a re-test of 1.3215 and potentially the 1.33 handle. A clear trendline break would shift momentum in favor of sellers, exposing downside toward prior supports.
1-hour chart
Intraday flow remains two-way around the trendline. Bulls are eyeing entries on shallow dips or on a break above the swing high, while bears prefer fades near resistance or confirmation via a clean trendline break. With U.S. Thanksgiving thinning liquidity, price may trade within the average daily range until a catalyst arrives.
What Traders Are Watching
– U.S. Initial Jobless Claims today; a higher print would reinforce dovish Fed pricing and weigh on USD, while a downside surprise could spark a short-covering bounce.
– U.S. Thanksgiving on Thursday, which often compresses FX liquidity and can amplify moves around data or headlines.
– Friday’s preliminary inflation data from major Eurozone economies, a potential driver for EUR crosses and broader dollar direction via rate-differential channels.
– The December FOMC decision, then U.S. NFP and CPI, which will likely set the tone for year-end positioning and early-2025 rate expectations.
Market Highlights
- Dollar extends losses as traders price a roughly 76% chance of a December Fed cut.
- Bloomberg report naming Kevin Hassett as Fed Chair frontrunner adds to dovish tone.
- Sterling holds firmer versus USD despite markets pricing an 85% probability of a December BoE cut.
- GBP/USD tests resistance near 1.3215; a break targets the 1.33 handle, while failure invites a pullback to the short-term trendline.
- Thanksgiving-thinned liquidity could heighten sensitivity to jobless claims and Eurozone flash CPI on Friday.
FAQ
Why is the U.S. dollar weakening right now?
Softer U.S. data and dovish Fed commentary have boosted expectations for a December rate cut. As policy-rate differentials compress, the dollar loses some of its carry advantage, prompting broad-based USD selling.
What could move GBP/USD next?
Near term, U.S. jobless claims and the UK Autumn Budget are key. A weak U.S. print likely supports GBP/USD, while any UK fiscal surprises could shift gilt yields and sterling’s risk premium. Technical breaks around 1.3215/1.3300 are pivotal.
How does the UK Autumn Budget affect the pound?
Changes to tax, spending, or borrowing can alter gilt supply expectations and influence UK rate pricing. A looser fiscal stance can steepen curves and complicate BoE easing, while a tighter stance can support sterling via lower term premia.
Will Thanksgiving impact FX trading conditions?
Yes. Liquidity typically thins around U.S. Thanksgiving, which can compress ranges but also magnify moves when data or headlines surprise. Traders often reduce size and tighten risk parameters.
What are the big macro events after the FOMC decision?
U.S. nonfarm payrolls and CPI are next in focus. They will help confirm whether a December cut is the start of a broader easing cycle and guide early-2025 rate expectations, a critical driver for the dollar and global risk appetite.
This article was produced by BPayNews for informational purposes.
