Pound-to-Dollar Forecast: GBP/USD Holds Rangebound As Traders Await ISM Data

The Pound US Dollar (GBP/USD) exchange rate remained rangebound on Tuesday amid the dovish pricing of Federal Reserve interest rate expectations.

DAILY RECAP:

The US Dollar (USD) remained relatively muted on Tuesday as growing expectations of a rate cut by the Federal Reserve ahead of next week’s policy meeting limited the currency’s upside.

The odds of a 25 basis point cut this month currently sit at around 87%.

Adding to the dovish bets surrounding the Fed is speculation that US President Donald Trump is set to announce that his top economic adviser in the White House, Kevin Hassett, will replace Jerome Powell as Chair of the US central bank when Powell’s term expires in May.

Hassett is thought to be closely aligned with Trump on the need for more aggressive interest rate cuts, as his nomination could accelerate the Fed’s cutting cycle next year.

The dovish Fed bets capped the US Dollar’s upside potential on Tuesday, limiting its gains from a modest decline in risk appetite.

The Pound (GBP) was largely directionless on Tuesday, as the absence of any major UK economic releases left traders on the sidelines.

With no fresh data to drive interest or shift expectations, Sterling lacked the catalyst needed to push it decisively higher or lower.

At the same time, uncertainty around interest-rate expectations for the Bank of England (BoE) remained in the background. With GDP and inflation outlooks still clouded, and the possibility of future rate cuts on the table, many traders are keeping GBP positions light until clearer signals emerge.