GBP/USD marches towards 1.1600 amid a decline in hawkish Fed bets

• GBP/USD is aiming to recapture 1.1600 as DXY struggles amid declining odds for the ultra-hawkish Fed.
• A slowdown in consumer spending has indicated that the inflationary pressures are exhausting.
• UK’s novel leadership is focusing on squeezing liquidity through fiscal policy.

The GBP/USD pair has witnessed a rebound from 1.1550 in the Tokyo session and is aiming to recapture the immediate hurdle of 1.1600. The cable has picked bids as the US dollar index (DXY) has witnessed come correction after failing to sustain above 110.50.

Meanwhile, the 10-year US Treasury yields is stabilizing around 3.93% after a firmer decline. The risk impulse is displaying mixed response as S&P500 futures have carry-forwarded their bearish Thursday sentiment.

The DXY is displaying a subdued performance in Asia as the odds of a bigger rate hike announcement by the Federal Reserve (Fed) have trimmed significantly. As per the CME FedWatch tool, the chances of 75 basis points (bps) rate hike by the Federal Reserve (Fed) have dropped further to 85.5%.

The reason behind a shift in the paradigm of a less-hawkish policy stance is the decline in consumer spending in the third quarter. The third quarter Gross Domestic Product (GDP) report claims that consumer spending has expanded by 1.4%, lower than the prior expansion of 2.0%. A slowdown in consumer spending indicates that inflation will soon peak around led by a fall in consumer demand. It is worth noting that consumer spending accounts for 70% of total economic activity.

On the UK front, novel UK Leadership with PM Rishi Sunak and Chancellor Jeremy Hunt are working on reducing the piled debt of the UK, the highest since 1960, to bring financial stability. Reports from Financial Times claim that Sunak is exploring tax rises and spending cuts of up to GBP 50 billion, which is in line with the agenda of the bank of England (BOE) of bringing price stability.