The British Pound (GBP) continued its decline on Thursday, underperforming against major currencies as concerns mount over the UK’s fiscal outlook. The currency weakened further against the US Dollar (USD), with the GBP/USD pair falling to around 1.3365, its lowest level in 10 days.
UK Fiscal Worries Deepen Ahead of Autumn Budget
Investor sentiment around the Pound soured following remarks from UK Chief Secretary to the Treasury James Murray, who confirmed that government agencies would not be permitted to use emergency funds to raise wages. This move is seen as part of a broader effort to prevent a wage-price spiral and keep public finances within self-imposed fiscal limits.
Market participants anticipate that the UK Treasury may resort to spending cuts, tax hikes, or both in the upcoming Autumn Budget in November to curb rising debt levels. Concerns have been rising since July, when Chancellor Rachel Reeves announced increased welfare spending.
BoE Policy Outlook Unclear Amid Sticky Inflation, Weak Jobs Market
On the monetary front, the outlook for the Bank of England (BoE) remains uncertain. With only two policy meetings left in 2025, investors are split on whether the BoE will cut interest rates again, especially as inflation remains stubborn and job demand continues to weaken.
BoE Chief Economist Huw Pill reiterated in a speech that monetary policy must remain tight enough to avoid reigniting inflation.
The next key data point for markets will be UK employment figures for the three months ending in August, due on Tuesday.
US Dollar Rebounds as Fed Minutes Support Rate Cut Expectations
Meanwhile, the US Dollar rebounded sharply after a brief correction. The US Dollar Index (DXY) bounced back toward a two-month high near 99.00, supported by dovish signals in the latest FOMC Minutes released on Wednesday.
The minutes revealed that Fed officials are increasingly open to interest rate cuts amid signs of labor market softening. Policymakers noted that inflation risks are no longer escalating and see it as “appropriate to ease policy further over the remainder of 2025.”
According to the CME FedWatch Tool, markets are pricing in a 78.6% probability of a 25 basis point cut at each of the two remaining Fed meetings this year.
Investors are also closely watching for a speech by Fed Chair Jerome Powell, scheduled later today, which could provide further clarity on the central bank’s outlook, especially in light of the ongoing US government shutdown.
Technical Outlook: GBP/USD Remains Under Pressure
Technically, GBP/USD continues to trade in bearish territory. The pair has dropped below the 20-day Exponential Moving Average (EMA) at 1.3458, and the 14-day Relative Strength Index (RSI) has slipped close to 40.00—a level that could indicate renewed downside momentum if breached.
- Key support: 1.3140 (August 1 low)
- Key resistance: 1.3726 (September 17 high)
Currency Performance Snapshot
As of Thursday, the Pound Sterling is the weakest performer among major currencies, especially against the Australian Dollar.
| Base / Quote | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| GBP | -0.16% | -0.10% | — | -0.18% | -0.19% | -0.32% | +0.03% | -0.25% |