FX.co ★ GBP/USD

The British pound fell into negative territory against the dollar during early European trading on Thursday, fluctuating around the 1.3250 level. The complex macroeconomic situation and the widening divergence in monetary policy between the Bank of England and the Federal Reserve continued to weigh on market sentiment. Earlier, Bank of England monetary policymaker Alan Taylor commented cautiously, suggesting that a single interest rate hike might not be sufficient to effectively address persistent inflation and could instead lead to unnecessary speculation about future rate increases. This triggered renewed selling pressure on the pound against the dollar. Meanwhile, data from the London Stock Exchange Group (LSEG) showed that traders expect the Bank of England to tighten monetary policy by around 33 basis points by the end of the year and by more than 100 basis points cumulatively by the end of 2027, although most institutional analysts anticipate a more dovish policy path. As for the US, the dollar came under slight downward pressure earlier this week due to weaker-than-expected personal consumption expenditures (PCE) inflation data. According to the CME FedWatch tool, this data lowered market expectations for a Federal Reserve interest rate hike in October to around 38.2%. However, the overall economic outlook remains strong, primarily due to robust domestic economic data and the continued hawkish stance of Fed officials. Federal Reserve Governor Neel Kashkari recently emphasized that the inflation rate of around 3% is still too high, citing strong consumer spending, ample job opportunities, and market skepticism about the current level of interest rate tightening as supporting factors. This strong economic environment makes the Fed likely to maintain a tight monetary policy for longer, potentially providing support for the dollar against lower-yielding currencies. In stark contrast to the Fed's recent hawkishness, the underlying outlook for the British pound received a structural boost from major institutions such as MUFG. MUFG recently raised its forecast for UK economic growth in the third quarter from 0.1% to 0.4%. Analysts believe that if energy price pressures persist, increased domestic economic activity could force the Bank of England to tighten monetary policy at a faster pace. Meanwhile, shifting geopolitical and political developments, such as the UK's openness to closer trade ties with the EU, have fueled speculation that the pound could benefit from a prolonged Brexit-related downside. However, market participants remain cautious ahead of key US economic data releases, including weekly initial jobless claims and the upcoming jobs report, which will significantly impact the dollar's ability to maintain its dominance. Technically, the daily chart for the GBP/USD pair shows a clear short-term downtrend, with the spot price under sustained pressure below the 100-day simple moving average and the 20-day Bollinger Band. The exchange rate has moved towards the lower end of its range, with the 14-day Relative Strength Index (RSI) at 33.20, just above oversold territory, indicating active but potentially fragile bearish momentum. Immediate support for the downside lies at the September 29 low of 1.3202, followed by the lower Bollinger Band around 1.3140. A daily close below these resistance levels could lead to a test of deeper psychological levels near the November 25 lows of 1.3038 and 1.3000. Conversely, any attempt at a corrective bounce must first break above the initial resistance of the recent high of 1.3311 and then enter the dense supply zone formed by the Bollinger Band middle line at 1.3385 and the 100-day moving average at 1.3415.