The Pound Sterling (GBP) edged lower on Monday, trading around 1.3420 against the US Dollar (USD) in the European session, down 0.4% on the day. The GBP/USD pair came under renewed selling pressure as the US Dollar extended its rebound, even as the prolonged United States (US) government shutdown raised the risk of widespread federal layoffs.
The US Dollar Index (DXY), which measures the Greenback’s value against a basket of six major currencies, advanced 0.55% to around 98.25, supported by safe-haven flows amid heightened fiscal uncertainty.
US shutdown impasse weighs on sentiment
Over the weekend, the White House warned that mass layoffs of federal employees could be imminent, as lawmakers failed to reach a consensus on a short-term funding bill ahead of Monday’s Senate vote. “US President Donald Trump and White House budget director Russ Vought are lining things up and getting ready to act if they have to, but hoping that they don’t,” National Economic Council Director Kevin Hassett told CNN’s State of the Union program.
Negotiations between Republicans and Democrats remain gridlocked. Democrats are pressing the administration to permanently extend enhanced premium tax credits under the Affordable Care Act and to commit to honoring future spending agreements without unilateral cuts. Meanwhile, Senate Democrats signaled reluctance to back the stopgap bill, with Senator Ruben Gallego telling CNN, “At this point, no,” when asked if a deal was close.
Daily digest: investors await BoE Bailey’s remarks
The Pound’s performance has been mixed across major currencies at the start of the week, with traders awaiting comments from Bank of England (BoE) Governor Andrew Bailey at the Global Investment Summit 2025 in Edinburgh, Scotland. Market participants hope Bailey’s speech will offer clarity on the central bank’s policy trajectory for the remainder of the year.
Investors are increasingly betting that the BoE will need to balance cooling labour market data against persistent inflationary pressures before committing to any rate cuts. At its August policy meeting, the BoE projected inflation would peak around 4% in September. However, Deputy Governor Clare Lombardelli and MPC member Catherine Mann recently cautioned that inflation shocks may prove more persistent than previously expected.
The BoE’s latest Decision Maker Panel (DMP) survey showed that one-year forward CPI inflation expectations among UK firms edged higher to 3.5% in the quarter ending September. Meanwhile, the revised UK S&P Global Services PMI for September came in at 50.8, down from the preliminary reading of 51.9 and well below August’s 54.2, signaling a cooling in business activity.
Technical analysis: GBP/USD capped below 20-day EMA
The Pound Sterling continues to trade within Friday’s range near 1.3440, struggling to regain momentum above the 20-day Exponential Moving Average (EMA) at 1.3476.
The 14-day Relative Strength Index (RSI) remains between 40 and 60, suggesting a lack of clear directional bias. On the downside, the August 1 low of 1.3140 forms a crucial support zone, while on the upside, the September 17 high of 1.3726 serves as the next key resistance level.
