GBP/USD currency pair crept higher on Monday, fluctuating at 1.3430, as increasing anticipation of Federal Reserve rate reductions put pressure on the US Dollar. Although the Bank of England is likely to maintain rates unchanged, fears of a US government shutdown along with hawkish statements by Fed policymakers introduced volatility into the market. Upbeat US economic news, such as a 4% increase in Pending Home Sales, was countered by the threat of a BLS data blackout. The Pound also received support from central bank divergence and political attention on the UK Labor Party conference, leaving investors optimistically cautious.

KEY LOOKOUTS

• Up to two Federal Reserve rate cuts expected by the market continue to put pressure on the US Dollar, impacting GBP/USD levels.

• Shutdown risks potentially could stifle releases of economic data, such as BLS reports, which add market uncertainty.

• The Bank of England will keep its rates unchanged, and Deputy Governor Ramsden is sure inflation will come back in line.

• GBP/USD is held back by resistance at 1.3466, and a fall below 1.3400 would risk further weakness to 1.3324.

GBP/USD pair rose to 1.3430 on Monday, pushed by increasing expectations of Federal Reserve rate reductions and a soft US Dollar as fears of the possible government shutdown rose. Encouraging US data, including a 4% increase in Pending Home Sales, was weighed down by concerns of a BLS data blackout if the shutdown takes place. At the same time, the Bank of England is likely to leave rates unchanged underpinned by Deputy Governor Ramsden’s optimism for bringing inflation back in line with target. Central bank convergence, along with political focus on the UK Labor Party conference, continues to underpin Sterling, although technical resistance around 1.3466 can cap gains.

GBP/USD rose to 1.3430 as expectations of Fed rate cuts pressured the US Dollar, with the BoE likely to maintain rates unchanged. Threats of US government shutdown and constructive Pending Home Sales data provide conflicting signals for the pair, keeping investors on their toes.

• GBP/USD at 1.3430, gaining 0.24% on a soft US Dollar.

• Market anticipates up to two Federal Reserve rate cuts, boosting Sterling.

• Bank of England to leave rates unmoved, indicating policy continuity.

• BoE Deputy Governor Ramsden still optimistic inflation will get back to target.

• US Pending Home Sales have increased 4% in August, beating expectations.

• Possible US government shutdown could suspend BLS economic release.

• Technical resistance around 1.3466 could cap further GBP/USD appreciation, support at 1.3400 and 1.3324.

The GBP/USD currency pair picked up pace on Monday as market sentiment was in Sterling’s favor due to expectations of possible rate cuts by the Federal Reserve. Though the Bank of England is likely to continue its present policy, the hawkish remarks of Deputy Governor Dave Ramsden added to optimism that inflation in the UK would return to target even as disinflation remained stalled. Meanwhile, the US Dollar was pressured as the threat of a government shutdown loomed, which might interfere with the release of major economic indicators, such as the Bureau of Labor Statistics reports.

GBP/USD Daily Chart Price

SOURCE: TradingView

Investor attention was also given to the political momentum in the UK, with the Labor Party conference in Liverpool coming into focus. Improved US economic indicators, like a 4% increase in Pending Home Sales for August, provided some respite to the Dollar but were overshadowed by uncertainty regarding fiscal and policy directions. Overall, the market is still balancing central bank divergence and geopolitical events, shaping the outlook for the GBP/USD pair in the near term.

TECHNICAL ANALYSIS

GBP/USD registered consecutive bullish sessions but still trades below the significant resistance range of 1.3480–1.3500, reflecting minimal upswings. The Relative Strength Index (RSI) indicates that sellers continue to have some dominance, with the pair treading immediate resistance at 1.3466, the high of September 25. On the negative side, levels of support to monitor are 1.3400, then the September 25 swing low at 1.3324, which may function as a pivotal level if bearish pressure accelerates. Generally speaking, although short-term bullish momentum is apparent, the pair’s ability to break higher is dependent on overcoming these vital technical points.

FORECAST

Should GBP/USD break the near-term resistance at 1.3466, the pair would test the subsequent key levels around 1.3480–1.3500. Market expectations of Fed rate cuts, supplemented by BoE policy stability, are likely to give further boost to Sterling, possibly triggering renewed buying interest in the near future. Favorable impulses from UK political events, including the Labor Party conference, can also give a boost to the pair.

On the negative side, a breakdown of gains over 1.3466 may have GBP/USD decline back to the 1.3400 support. A break below this region would turn the September 25 swing low at 1.3324, indicating more intense selling pressure. Increased risks of a US government shutdown and mixed US economic indicators have the potential to weigh on the Dollar, introducing added volatility and leaving the pair open to downward corrections.