British Pound slides further ahead of Fed decision and UK budget, extending 4-day decline

Selling pressure keeps GBP/USD on a four-day losing streak, with the pair down 0.14% at 1.3321.
A rise to 91.7 marks a sharp improvement in US Consumer Confidence, alongside a 1.6% increase in Durable Goods.
Wednesday brings two key events into focus: the Fed decision and the UK Autumn Budget.

Sterling remains under pressure against the US Dollar for a fourth consecutive day, losing 0.14% as the Greenback posts modest gains before Wednesday’s Federal Reserve monetary policy decision. On Tuesday, GBP/USD is trading at 1.3321, confined to a 1.3307-1.3349 range.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Can GBP/USD hold near 1.3300 as firm US data underpins the Dollar before key policy decisions?

Despite continuing hostilities in the Middle East, sentiment across markets remains upbeat. Reports indicated that debris was falling over Riyadh in Saudi Arabia, causing damage, according to SPA. Iran’s supreme leader Mojtaba Khamenei, meanwhile, restated the country’s terms for ending the war with the US. Before peace talks can take place, Tehran wants the US naval blockade lifted and sanctions removed.

Housing figures on the US economic calendar showed a sharp slowdown in New Home Sales: September recorded -0.6% MoM, compared with 6.4% in August.

Greater household optimism about employment prospects and business conditions drove an unexpected improvement in Consumer Sentiment, the Conference Board (CB) reported. The reading climbed to 91.7 in October from 84.2. Within the survey, 12-month inflation expectations held at 5.8%, still substantially above the Fed’s target.

Robust business investment during the expansion of AI infrastructure accompanied a September jump of 1.6% in Durable Goods Orders, against the previous 0.1% rise. An earlier release pointed to a modest cooling in the labour market: the ADP Employment Change 4-week average eased to 16.8K from 18.5K.

Money markets, meanwhile, point to unchanged Fed rates on Wednesday, while assigning a 19% probability to a hike. According to Prime Terminal, the odds for December have continued to decline, reaching 82% from around 90% last week.

Fed interest rate probabilities | Source: Prime Terminal

Sterling’s performance in the UK is mixed: it is gaining against the Euro, which faces pressure from France’s fiscal problems, but losing ground to the Greenback.

Attention now turns to the UK Autumn Budget. Chancellor Healey is expected to deliver a sustainable fiscal plan that avoids unsettling the bond market while honouring some of Andy Burnham’s government’s promises. The Financial Times reports that John Healey is set to announce a 4% increase for low-wage workers.

Looking ahead, traders are preparing for Wednesday’s Fed meeting, while the UK budget is the main event on the domestic economic calendar.

GBP/USD Price Forecast: What does the technical outlook indicate?

Chart Analysis GBP/USD — Daily price chart for GBP/USD

A bearish short-term bias persists on the daily chart, where GBP/USD is trading at 1.3314 beneath the latest simple moving average cluster near 1.3396. A falling resistance trend line also lies close to that area. Although the pair has moved away from the former trend-line resistance that became support at 1.3257, it remains only slightly above this level. That positioning suggests sellers retain control of the broader structure. Meanwhile, a 14-period Relative Strength Index reading of around 48 points to momentum easing towards neutral, rather than signalling a forceful recovery.

The first resistance zone on the upside lies around 1.3396, the meeting point of the 50-, 100- and 200-day simple moving averages. Beyond it, rising trend supports that have become resistance create further hurdles near 1.3644 and 1.3823. Initial meaningful support on the downside is at the broken trend-line level near 1.3257. A daily close beneath that floor would likely pave the way for a steeper decline, extending the pair’s retreat from the dense resistance zone above.

(The technical analysis of this story was written with the help of an AI tool. Learn more.)

Pound Sterling: Frequently asked questions

What should you know about the Pound Sterling?

As the United Kingdom’s official currency, the Pound Sterling (GBP) is also the world’s oldest currency, dating to 886 AD. Figures for 2022 place it fourth among the most traded currencies in the foreign exchange (FX) market, with a 12% share of all transactions and average daily turnover of $630 billion. Among its principal pairs, GBP/USD, known as ‘Cable’, represents 11% of FX trading. GBP/JPY, which traders call the ‘Dragon’, accounts for 3%, while EUR/GBP accounts for 2%. Responsibility for issuing the Pound Sterling rests with the Bank of England (BoE).

Why do Bank of England decisions matter for the Pound Sterling?

Monetary policy set by the Bank of England has the greatest influence on the Pound Sterling’s value. In making its decisions, the BoE assesses whether it has met its central objective of “price stability” – inflation holding steady at around 2%. Adjusting interest rates is its main means of pursuing that goal. If inflation runs too high, the BoE seeks to curb it through higher interest rates, increasing borrowing costs for households and businesses. GBP generally benefits because higher rates make the UK a more appealing destination for international investors’ funds. Conversely, excessively low inflation signals slowing economic growth. The BoE would then consider cutting interest rates to reduce the cost of credit, encouraging businesses to borrow and invest in projects that support growth.

Why can economic releases move the Pound?

By revealing the economy’s condition, data releases can affect the Pound Sterling’s value. GDP, Manufacturing and Services PMIs, and employment figures are among the indicators that can shape GBP’s direction. Economic strength supports Sterling by drawing in foreign investment and potentially prompting the BoE to raise interest rates, which directly strengthens GBP. Weak economic readings, by contrast, are likely to weigh on the Pound Sterling.

Why is the Trade Balance important for the Pound?

The Trade Balance is another important release for the Pound Sterling. Over a specified period, it compares a country’s export earnings with its expenditure on imports. Strong overseas demand for a country’s exports supports its currency through the additional demand from foreign buyers purchasing those goods. A positive net Trade Balance therefore strengthens the currency, while a negative balance has the opposite effect.