Sterling's two-day rise might be short-lived if the Fed signals on Wednesday a more gradual rate cut path in 2025 than currently expected by markets.

Cable tested 30-DMA resistance above 1.27 in early NorAm as U.S. yields declined ahead of Wednesday's expected hawkish 25bp Fed cut and a BoE rate hold anticipated on Thursday.

Traders will scrutinize post-meeting news conferences for U.S. and UK policy insights.

Fed Chair Jerome Powell and other policymakers have said there is no need to hurry to cut rates, while inflation's path lower has stalled.

Futures markets are currently pricing in 71bp of Fed cuts in 2025, with pauses expected in January and March. LSEG's IRPR suggests a reduction of 55bp by the March 2025 meeting for the Fed and 36bp by June 2025 for the BoE.

As markets adjust for both year-end and the upcoming regime change in the U.S. the dollar is likely to remain well-bid. As inflation and political uncertainties clarify in 2025, sterling may regain momentum driven by relative rate fundamentals.

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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

((paul.spirgel@thomsonreuters.com))