GBP/USD trades cautiously below 1.3100 with FOMC minutes on the horizon

GBP/USD remains below 1.3100 as traders brace for the FOMC Minutes.
Upbeat US labor market data has diminished risks of an economic slowdown.
Investors expect the BoE to cut interest rates again by 25 bps.

The GBP/USD pair trades with caution below the crucial resistance of 1.3100 in Wednesday’s London session. The Cable remains under pressure as the US Dollar (USD) extends its upside, with traders pricing out another Federal Reserve (Fed) 50 basis points (bps) interest rate cut in November.

The market sentiment remains risk-averse amid escalating tensions between Israel and Iran. S&P 500 futures have posted some losses in European trading hours. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, strives to rally further above 102.70.

Market participants are not expecting the Fed to reduce interest rates again with a larger-than-usual pace of 50 bps as risks of a United States (US) economic slowdown have diminished after the release of the upbeat labor market data for September, which showed robust job growth and stronger-than-expected wage growth momentum.

In Wednesday’s session, investors will focus on the Federal Open Market Committee (FOMC) minutes for the September meeting, which will be published at 18:00 GMT. In the policy meeting, Fed officials unanimously voted to reduce interest rates by 50 basis points (bps) to 4.75%-5.00%, except Fed Governor Michelle Bowman, who supported a usual rate cut of 25 bps.

In the United Kingdom (UK) region, the Pound Sterling (GBP) will be guided by market expectations for the Bank of England’s (BoE) interest rate outlook for the remainder of the year. The BoE is expected to cut interest rates again by 25 bps in one of its two meetings remaining this year. On the economic front, investors will focus on the monthly Gross Domestic Product (GDP) and the factory data for August, which will be published on Friday.

Economic Indicator

FOMC Minutes

FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.

Why it matters to traders?

Minutes of the Federal Open Market Committee (FOMC) is usually published three weeks after the day of the policy decision. Investors look for clues regarding the policy outlook in this publication alongside the vote split. A bullish tone is likely to provide a boost to the greenback while a dovish stance is seen as USD-negative. It needs to be noted that the market reaction to FOMC Minutes could be delayed as news outlets don’t have access to the publication before the release, unlike the FOMC’s Policy Statement.

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