Daily digest marker movers Pound Sterling tracks US Dollar’s muted action

The Pound Sterling trades in a tight range near 1.2650 against the US Dollar (USD) in Thursday’s London session. The GBP/USD pair consolidates, tracking the US Dollar Index’s (DXY) performance, which trades mutely despite a strong recovery on Wednesday, as investors look for fresh cues about the Federal Reserve (Fed) interest rate path.

Recently, traders pared Fed rate cut bets for December as investors expect President-elect Donald Trump’s policies on trade and taxes will be inflationary and growth-oriented, a scenario that would force the Fed to follow a more gradual policy-easing approach.

The Fed's probability of cutting interest rates by 25 bps to the 4.25%-4.50% range in December has come down to 52% from 72% a week ago, according to the CME FedWatch tool. Meanwhile, Fed policymakers have contradictory opinions about the likely Fed interest rate path.

On Wednesday, Boston Fed Bank President Susan Collins emphasized the need to push the monetary policy gradually towards a neutral range from its current restrictive state as she is confident about inflation remaining on track to the bank’s target of 2%. Meanwhile, Fed Governor Michelle Bowman said, "It's concerning to me that we're recalibrating policy, but we haven't yet achieved our inflation goal."