GBP/USD holds position around 1.3200 ahead of UK PM Starmer’s speech

• GBP/USD inches higher due to improved market optimism amid easing Middle-East tensions.
• San Francisco Fed President Daly supported the idea of starting to cut interest rates, with a reduction of 25 basis points.
• UK PM Starmer may emphasize that "change won't happen overnight," but he is committed to tackling bigger issues.

GBP/USD inches higher following the easing of the concerns about an imminent broader conflict in the Middle East have diminished following an exchange of fire between Israel and Lebanon's Hezbollah that did not escalate further. US Air Force General C.Q. Brown, chairman of the Joint Chiefs of Staff, told Reuters early Tuesday after concluding a three-day trip to the region. The risk-sensitive GBP/USD pair trades around 1.3190 during Tuesday’s Asian hours.

The US Federal Reserve (Fed) Chairman Jerome Powell stated at the Jackson Hole Symposium on Friday, "The time has come for policy to adjust." However, Powell did not specify when rate cuts would begin or their potential size. According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting.

Additionally, San Francisco Federal Reserve President Mary Daly stated on Monday in an interview with Bloomberg TV that "the time is upon us" to begin cutting interest rates, likely starting with a quarter-percentage point reduction. Daly suggested that if inflation continues to slow gradually and the labor market maintains a "steady, sustainable" pace of job growth, it would be reasonable to "adjust policy at the regular, normal cadence."

In the United Kingdom (UK), the BRC Shop Price Index fell by 0.3% year-on-year in August compared with the previous increase of 0.2% in July. British shop prices fell in annual terms this month for the first time since October 2021, pushed down by summer sales of clothes and household goods.

UK Prime Minister Keir Starmer stated last week that addressing Britain's numerous challenges will take time, warning that "things will get worse before they get better" in a speech he described as an opportunity to be candid with the public. As Britain's parliament returns to work after the summer break on Tuesday, Starmer may emphasize that "change won't happen overnight," but his government is committed to tackling a wide range of issues, from overcrowded prisons to long waiting lists for health services.