GBP/USD Slips Below 1.3500 as Dollar Strengthens; Powell Signals September Rate Cut

The British Pound (GBP) came under renewed selling pressure in Monday’s Asian session, pushing GBP/USD lower to 1.3495. The decline follows a modest rebound in the US Dollar (USD), though dovish remarks from Federal Reserve (Fed) Chair Jerome Powell at the Jackson Hole Symposium could help cushion further losses in the near term.

Fed Powell Hints at Imminent Rate Cuts

In his Jackson Hole address, Fed Chair Powell acknowledged the US economy is facing a “challenging situation,” with inflation risks tilted upward and employment risks weakening. He signaled that the central bank could resume interest rate cuts as early as the September meeting, keeping markets on edge.

According to the CME FedWatch Tool, traders are now pricing in an 85% probability of a 25-basis-point cut in September, compared with firmer expectations just a week ago. While Powell’s comments opened the door to policy easing, the USD remains broadly supported by safe-haven demand and resilient economic data, capping GBP/USD’s upside attempts.

UK Inflation Limits BoE’s Easing Path

On the UK front, hotter-than-expected July CPI inflation has cast doubt on the pace of the Bank of England’s (BoE) easing cycle. The central bank recently lowered interest rates from 4.25% to 4.0%, calling it a “gradual and careful” approach to monetary policy. However, with inflation still running high, markets now anticipate the next BoE cut no earlier than March 2026.

This hawkish tilt from the BoE compared to Powell’s dovish stance could offer medium-term support to Sterling. Still, the lack of top-tier UK data releases this week leaves the Pound vulnerable to broader USD dynamics.

Key Events to Watch

• US New Home Sales and the Chicago Fed National Activity Index will be published later today.
• Market attention will remain fixed on Powell’s guidance and the Fed’s policy trajectory.
• For the Pound, investors will monitor how inflation expectations shape the BoE’s next moves.

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