Pound Sterling Slips as Fed Decision Looms.
Pound Sterling Weakens Against the US Dollar as Markets Await Fed Policy Decision
FUNDAMENTAL OVERVIEW:
The Pound Sterling (GBP) extended its decline on Wednesday, slipping toward a three-month low near 1.3200 against the US Dollar (USD) as a stronger Greenback and subdued market sentiment weighed on the pair.
The US Dollar Index (DXY) gained 0.2%, trading around 99.00, as traders positioned ahead of the Federal Reserve’s policy decision due later today at 18:00 GMT. Markets widely expect a 25 basis-point rate cut, which would lower the target range to 3.75%–4.00%.
According to the CME FedWatch Tool, traders are also pricing in a high probability of another rate cut in December as inflation cools, the labor market shows signs of softening, and the U.S. government shutdown drags on.
Adding to market anxiety, Senate Democratic Leader Chuck Schumer confirmed on Tuesday that the shutdown may extend into November, potentially amplifying the need for policy easing to sustain economic momentum.
The British Pound, meanwhile, remains under pressure from domestic growth concerns and limited fiscal headroom, while ongoing political uncertainty over post-Brexit trade commitments continues to weigh on the currency’s medium-term outlook.
GBP/USD TECHNICAL ANALYSIS (DAILY CHART):
Technical Overview:
- GBP/USD is trading within a down channel.
- The pair remains below all major Simple Moving Averages (SMA).
- The Relative Strength Index (RSI) sits in the Neutral Zone, while the Stochastic Oscillator signals a Negative trend.
| Key Levels | Observation |
|---|---|
| Immediate Resistance: | 1.3323 |
| Immediate Support: | 1.3094 |
Technical Outlook:
On higher timeframes, GBP/USD attempted a short-lived rebound after early losses but soon reversed lower, forming a Bearish Engulfing pattern. The pair’s sustained move below the 1.3200 mark reinforces the downside bias. Unless buyers reclaim 1.3323, continued weakness toward 1.3090 remains likely in the near term.
HOW TO TRADE GBP/USD
Trade Suggestion – Limit Sell:
- Entry: 1.3288
- Take Profit: 1.3135
- Stop Loss: 1.3400
AI FAQ – GBP/USD MARKET INSIGHTS
Q: Why is GBP/USD trading lower this week?
A: The Pound has weakened due to broad USD strength ahead of the Fed’s rate decision and sustained domestic economic concerns in the UK.
Q: What event could cause volatility in GBP/USD?
A: The Fed policy announcement is the key risk event. A dovish Fed tone may cap USD gains, while a neutral or hawkish tone could drive GBP/USD lower.
Q: What technical levels are crucial to watch?
A: 1.3094 serves as immediate support. A sustained break below this could trigger deeper downside toward the 1.3000 area.
Q: What could support the Pound going forward?
A: Signs of a stronger UK economic recovery or a weaker U.S. inflation outlook could help GBP/USD stabilize above 1.33.
DISCLAIMER:
This report is for informational purposes only and does not constitute financial or investment advice. Trading foreign exchange carries significant risk, and past performance is not indicative of future results.