The GBP/USD pair edged higher to approximately 1.3190 during Tuesday’s Asian trading hours, following a reduction in concerns about a broader conflict in the Middle East. Top U.S. General C.Q. Brown indicated to Reuters early Tuesday that the recent skirmishes between Israel and Lebanon’s Hezbollah over the weekend have not escalated, easing geopolitical tensions.
Federal Reserve Rate Cut Expectations Mount
U.S. Federal Reserve Chairman Jerome Powell signaled a potential shift in monetary policy at the Jackson Hole Symposium on Friday, stating, “The time has come for policy to adjust.” Although Powell did not specify the timing or magnitude of future rate cuts, market expectations are high. The CME FedWatch Tool reflects that traders are anticipating at least a 25 basis point reduction in interest rates at the Fed’s September meeting.
In a related development, San Francisco Federal Reserve President Mary Daly echoed the sentiment in a Bloomberg TV interview on Monday. Daly suggested that a quarter-percentage point rate cut is imminent and would be reasonable if inflation continues to decelerate and the labor market remains stable. She emphasized the importance of adjusting policy in a regular and measured manner.
UK Economic and Political Developments
In the United Kingdom, the BRC Shop Price Index recorded a 0.3% year-on-year decline in August, reversing the 0.2% increase seen in July. This marks the first annual drop in British shop prices since October 2021, attributed to summer discounts on clothing and household goods.
UK Prime Minister Keir Starmer, addressing the public last week, acknowledged that resolving Britain’s various challenges will require time. He cautioned that “things will get worse before they get better” in a speech aimed at setting realistic expectations. As Parliament resumes its activities after the summer recess, Starmer is expected to emphasize the government’s commitment to addressing critical issues such as overcrowded prisons and long health service waiting lists, despite acknowledging that meaningful change will not be immediate.
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