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The Pound Sterling rises toward 1.3480 against the US Dollar, supported by growing Fed rate cut expectations that pressure the Greenback.
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Fed Governor Bowman signaled support for three rate cuts this year.
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Traders now await key UK employment data and the US CPI report, both due Tuesday.
The Pound Sterling (GBP) continues its upward momentum, marking the fifth consecutive day of gains against the US Dollar (USD) as the new trading week begins. The GBP/USD pair approaches 1.3480, lifted by the weakening US Dollar amid growing expectations of interest rate cuts by the Federal Reserve (Fed).
At the time of writing, the US Dollar Index (DXY), which measures the USD against a basket of six major currencies, is down 0.17% near 98.00.
The Greenback remains under pressure as traders increasingly bet on the Fed easing policy at its September meeting. According to the CME FedWatch Tool, markets are pricing in an 88% probability of a 25 basis point cut, which would bring the federal funds rate to a range of 4.00%–4.25%.
Sentiment for rate cuts has been further reinforced by dovish remarks from Fed officials. Over the weekend, Fed Governor Michelle Bowman cited the weak July Nonfarm Payrolls (NFP) report as a reason to support three rate cuts this year. She stated, “With economic growth slowing this year and signs of a less dynamic labor market becoming clear, I see it as appropriate to begin gradually moving our moderately restrictive policy stance toward a neutral setting.”
Daily Digest Market Movers: Sterling Outlook Hinges on UK Jobs Data
- The Pound also benefits from easing expectations of further Bank of England (BoE) rate cuts in 2025. A Reuters report indicates that traders now anticipate the next rate cut in February, rather than December, following Thursday’s 25 basis point cut to 4.00% and a cautious policy outlook.
- BoE Chief Economist Huw Pill signaled a more measured path forward for rate reductions. Speaking on Friday, Pill said, “There’s still a little bit further downward to go with Bank Rate,” but added that the pace of cuts may slow due to rising inflation expectations. The BoE’s Monetary Policy Committee (MPC), he emphasized, is closely watching inflation projections over the next two to three years.
- Looking ahead, market attention turns to UK labor market data for the three months ending in June, due Tuesday. Investors will assess whether firms are still holding off on hiring due to higher social security contributions. Economists forecast the ILO Unemployment Rate to hold steady at 4.7%, while Average Earnings (both including and excluding bonuses) are expected to rise 4.7% annually, down from 5.0%.
- On the same day, the US Consumer Price Index (CPI) report for July is also set for release. The headline CPI and core CPI (which strips out food and energy) are both expected to show faster year-over-year growth, at 2.8% and 3.0%, respectively.
Technical Analysis: Pound Sterling hits two-week high near 1.3480
The Pound Sterling extends its week-long rally, reaching near 1.3480 against the US Dollar on Monday—its highest level in two weeks. The GBP/USD pair shows bullish momentum, having moved above the 20-day Exponential Moving Average (EMA), currently around 1.3408.
The 14-day Relative Strength Index (RSI) has rebounded above the 50.00 mark after previously trading between 20.00 and 40.00, signaling a potential bullish reversal.
On the downside, key support is seen near the August 1 low at 1.3140. To the upside, the July 23 high around 1.3585 stands as the next major resistance level.
