The Pound Sterling (GBP) edged higher on Monday, rebounding from a two-week low near 1.3500 against the U.S. Dollar (USD). The GBP/USD recovery follows a three-day slide as the Greenback retreats from recent highs.
At the time of writing, the U.S. Dollar Index (DXY)—which tracks the USD against six major peers—has eased from its one-week peak of 97.80, posted earlier in the day.
The Dollar’s recent strength stemmed from last Wednesday’s Federal Reserve (Fed) rate cut, with investors having largely priced in the move ahead of time. While lower rates typically weigh on the Greenback, the Fed’s cautious tone helped stabilize demand in recent sessions.
Last week, the Fed reduced interest rates by 25 basis points (bps) to a 4.00%–4.25% target range, citing labor market weakness and signaling the likelihood of at least one more cut before year-end.
Fed outlook in focus
Attention now turns to Fed Chair Jerome Powell’s speech at the Greater Providence Chamber of Commerce’s 2025 Economic Outlook Luncheon on Tuesday, where markets will seek clarity on the policy path ahead. Also due Tuesday are preliminary September S&P Global PMI figures, with the U.S. Composite PMI expected to hold steady at 54.6.
Meanwhile, several Fed officials are scheduled to speak on Monday, including newly appointed FOMC member Stephen Miran, who dissented in favor of a 50-bps cut at last week’s meeting.
Daily digest market movers: uk fiscal concerns cap sterling’s rebound
The Pound’s rebound comes against a backdrop of persistent U.K. fiscal challenges. Data released Friday showed public sector net borrowing surged to nearly £18 billion in August, well above expectations of £12.5 billion.
The jump in borrowing has pushed long-dated gilt yields higher, with 30-year yields trading near 5.57% on Monday. Elevated borrowing costs could limit fiscal room in the upcoming Autumn Budget, due in November. Investors are also wary that Chancellor of the Exchequer Rachel Reeves may resort to tax hikes to offset spending commitments announced in July.
On the data front, markets await Tuesday’s preliminary U.K. S&P Global PMI reports. The Services PMI is projected to ease to 53.6 from August’s 54.2, signaling slowing momentum. In addition, Bank of England (BoE) Governor Andrew Bailey is set to deliver a speech at 18:00 GMT on Monday, which could offer fresh signals on the monetary policy outlook.
Technical analysis: gbp/usd still bearish despite bounce
GBP/USD recovered toward 1.3500 on Monday, but the near-term trend remains bearish as the pair trades below the 20-day Exponential Moving Average (EMA), now around 1.3524. Price action is also hovering near the lower boundary of a rising channel around 1.3470.
Momentum indicators point to underlying weakness. The 14-day Relative Strength Index (RSI) has slipped below 50. A move under 40 would indicate renewed bearish pressure.
On the downside, support is seen at the August 1 low of 1.3140. On the upside, resistance lies at the July 1 high near 1.3800.
