GBP/USD opened the new trading week with a bearish gap, slipping below the mid-1.3400s on Monday, as the US Dollar (USD) sees renewed strength across the board. Despite Friday’s gains, the pair is down over 0.30% on the day, with downside pressure lingering though follow-through selling remains limited.
Stronger USD Pressures Sterling Despite Broader Headwinds
The US Dollar is benefitting from a mix of safe-haven demand and expectations of delayed Bank of Japan (BoJ) tightening, after Japan’s ruling LDP elected Sanae Takaichi as its new leader. Known for her dovish fiscal stance, Takaichi’s appointment raises the possibility of the BoJ maintaining easy monetary policy for longer, which has triggered broad-based Yen weakness and helped lift the USD.
However, the upside for the USD may remain capped amid expectations that the Federal Reserve will cut interest rates twice before the end of the year. Additionally, the ongoing US government shutdown, now into another week without resolution, adds to concerns about economic disruption, potentially limiting USD strength in the near term.
BoE Policy Outlook Supports the Pound
Meanwhile, market participants are increasingly betting that the Bank of England (BoE) will pause further rate cuts in 2025, citing persistent inflation and resilient UK economic data. This cautious policy stance could offer some support for the British Pound, helping to limit downside in GBP/USD.
Money markets currently suggest the BoE is unlikely to alter its policy this year, as officials continue to balance inflation risks with signs of slowing economic momentum.
Traders Await UK PMI Data and BoE Bailey’s Speech
Looking ahead, the focus for Sterling traders shifts to the release of the UK Construction PMI, followed by a high-impact speech from BoE Governor Andrew Bailey later in the day at the Global Investment Summit in Edinburgh. His comments may provide fresh clues on the BoE’s policy path and generate volatility for GBP pairs.
Technical Outlook: GBP/USD Lacks Direction Below 1.3450
GBP/USD remains stuck within a sideways range, trading below the 20-day Exponential Moving Average (EMA) near 1.3476. The pair currently hovers around 1.3440, struggling to recover Friday’s gains.
- Support: August 1 low near 1.3140
- Resistance: September 17 high at 1.3726
- RSI (14-day): Trending within the neutral 40–60 range, signaling lack of momentum
A decisive break below 1.3400 could open the door for a deeper pullback, while a recovery above the 20-day EMA is needed to shift the short-term bias back in favor of the bulls.
Pound Sterling FAQs: Key Drivers of GBP Value
What drives GBP?
- BoE policy decisions are the main influence. Higher interest rates support GBP; lower rates pressure it.
- UK economic data like GDP, inflation, and employment can trigger short-term moves.
- Trade balance figures affect GBP via export/import flows.
- Risk sentiment and geopolitical events also play a role in GBP/USD fluctuations.