The Pound Sterling (GBP) is trading with caution against its peers at the start of the week as investors await the Bank of England’s (BoE) monetary policy announcement on Thursday. Uncertainty around the BoE’s next move has kept the British currency under pressure, with market participants weighing slowing UK job growth and softer inflation against broader global trends.
BoE dovish bets rise amid slower UK growth
Market expectations of a BoE interest rate cut have increased after September data showed slower-than-expected Consumer Price Index (CPI) growth and signs of moderating labor demand. Reuters reports that traders currently assign roughly a one-in-three probability to a 25-basis-point cut to 3.75%.
Analyst opinions remain split: Goldman Sachs anticipates a rate reduction, while ING expects rates to remain unchanged, reflecting a 5-4 vote split among BoE policymakers. The central bank also noted that inflationary pressures are expected to peak near 4% this month, supporting a cautious approach.
Pound consolidates against US Dollar
During Monday’s European session, GBP/USD trades sideways around 1.3140, after finding temporary support near 1.3100, its lowest level in over six months. The pair remains under pressure as the US Dollar strengthens amid receding bets on further Federal Reserve (Fed) rate cuts.
At present, the US Dollar Index (DXY) hovers near a three-month high of 99.85, while the probability of a December Fed rate cut has fallen to 69.3% from 94.4% a week ago. Fed Chair Jerome Powell emphasized that a December rate reduction is “far from a foregone conclusion,” keeping markets cautious.
Investors are also eyeing the US ISM Manufacturing PMI for October, expected at 49.2, which would indicate a marginal improvement yet still signal contraction if below 50.
Technical outlook: GBP/USD remains bearish
The Pound trades below its 200-day EMA (~1.3290), with the 14-day RSI near 30, highlighting bearish momentum. Key support lies at the psychological 1.3000 level, while resistance is seen around 1.3370, the October 28 high.
Pound Sterling overview
- The GBP is the world’s oldest currency (dating back to 886 AD) and the UK’s official currency.
- Monetary policy by the BoE, inflation trends, economic data (GDP, PMI, employment), and the trade balance significantly influence GBP’s value.
- Strong economic data and higher interest rates typically strengthen GBP, while weak data or dovish policy expectations can weigh on the currency.
