The GBP/USD pair has seen some modest gains after a three-day losing streak, rising to around 1.3130 in the early hours of Monday. However, these gains appear to be limited given the shifting dynamics surrounding the monetary policies of both the U.S. Federal Reserve and the Bank of England.
Bank of England Governor Andrew Bailey hinted that the central bank could be "more dovish" in cutting interest rates if inflation continues to ease as expected. This signal increases the likelihood of the pound being undermined if interest rates are reduced faster or more significantly than anticipated.
The recent strong non-farm payroll data, which showed the U.S. economy added 254,000 jobs in September, weakens expectations of a more significant rate cut. Annual wage growth increased to 4.0%, suggesting the Fed might adopt a more cautious approach to rate cuts.
Bank of England's Chief Economist, Huw Pill, expressed a more cautious tone, stating that the central bank should only take gradual steps in cutting rates, creating a divide in the financial markets regarding the future direction of monetary policy.
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