• GBP/USD continues to be weighed down by a combination of negative factors.
• The Fed’s hawkish tilt continues to underpin the USD and act as a headwind.
• The UK’s fiscal concerns and BoE rate cut bets act as a headwind for the pair.

The GBP/USD pair remains depressed below mid-1.3100s at the start of a new week and languishes near its lowest level since April 14, touched on Friday. Meanwhile, the fundamental backdrop seems tilted in favor of bearish traders and backs the case for an extension of the recent well-established downtrend witnessed over the past one-and-a-half month or so.

The US Dollar (USD) stands firm near a three-month high in the wake of the US Federal Reserve (Fed) Chair Jerome Powell's hawkish tilt last week and is seen as a key factor that continues to weigh on the GBP/USD pair. In fact, Powell pushed back against market expectations for another 25 basis points (bps) interest rate cut in December. This helps offset concerns about economic risks stemming from a prolonged US government shutdown and continues to underpin the Greenback.

The British Pound (GBP), on the other hand, continues with its relative underperformance on the back of growing concerns about the UK's fiscal situation ahead of Finance Minister Rachel Reeves' Autumn budget on November 26. Furthermore, rising bets for more rate cuts by the Bank of England (BoE) validate the negative outlook for the GBP/USD pair. However, it will be prudent to wait for the BoE policy update on Thursday before positioning for the next leg of a directional move.

Traders are pricing in a 1-in-3 chance of a 25 bps rate cut on November 6 and a roughly 68% probabiliy of a cut by the year-end as softer inflation and fiscal headwinds provide a greater scope to ease policy. Moreover, a further softening in wage growth and a rise in unemployment revived bets on an imminent rate cut . This, along with last week's breakdown below the 200-day Simple Moving Average (SMA), suggests that the path of least resistance for the GBP/USD pair is to the downside.