FX.co ★ GBP/USD

The pound fell to around 1.3375 against the dollar in early European trading, weighed down by the ongoing macroeconomic effects of the Federal Reserve's dramatic shift in monetary policy last week. The Fed's unanimous decision to raise its benchmark interest rate to a range of 3.75% to 4.00% pushed US borrowing costs above the Bank of England's benchmark rate of 3.75% for the first time in several cycles, dramatically altering the yield landscape and giving the dollar a stronger advantage. Given the Fed's updated dot-majority chart, which indicates market expectations of another rate hike later this year, and the widespread expectation of further monetary tightening in the money market, the dollar continues to attract strong safe-haven and yield-driven demand. Meanwhile, the Bank of England voted 6-3 to keep its benchmark interest rate unchanged at 3.75%. Although policymakers expect UK domestic inflation to rise to around 4% early next year, the pound remains vulnerable to broader downward pressures due to the absence of short-term tightening measures. Despite the apparent divergence in monetary policy stances, structural support for the pound remains intact, underpinned by a generally positive domestic political and financial environment. Market participants and analysts at Scotiabank have confirmed that continued market confidence in the UK government’s fiscal responsibility and discipline is a key pillar of stability for sterling-denominated assets. Furthermore, while broader geopolitical factors, such as ongoing tensions in the Middle East and developments in the trade landscape, continue to generate cyclical fluctuations in global foreign exchange markets, short-term price movements remain dependent on central bank monetary policy expectations and interest rate forecasts.

Technically, the daily chart for the GBP/USD pair shows a clear short-term bearish bias, with the spot price hovering below the 100-day moving average and the middle Bollinger Band. Currently, the price is hovering above the lower Bollinger Band, indicating continued downward pressure. Momentum indicators reflect this defensive stance, with the 14-day Relative Strength Index (RSI) approaching 35, suggesting weak bullish momentum and seller dominance, but not yet reaching oversold levels. On the upside, initial technical resistance lies near the 100-day moving average (around 1.3435), followed by the middle Bollinger Band (around 1.3505). Stronger resistance is located near the upper Bollinger Band (around 1.3655), and a break above this structural resistance is needed to counterbalance the current downtrend. Conversely, the lower Bollinger Band, around 1.3355, provides immediate bearish support. A break below this support could lead to a further decline for the pair to its September 18 low of 1.3335, while deeper historical support lies near its July 28 low of 1.3273. Market participants will be closely monitoring upcoming preliminary PMI data and central bank statements for new directional catalysts.