Market Analysis

The pound sterling is losing value as bets on a slight increase in Fed rate cuts rise

Amos Simanungkalit · 12 Sep26K Views

The Pound Sterling (GBP) showed mixed performance against major currencies during Thursday's European trading session. The currency may strengthen as market participants anticipate that the Bank of England (BoE) will follow a less aggressive policy-easing cycle compared to other central banks.

A Reuters poll suggests that the BoE is likely to maintain its interest rate at 5% in its upcoming meeting, though a cut is expected in November despite inflation remaining above the central bank’s 2% target. BoE Governor Andrew Bailey’s remarks at the Jackson Hole Symposium also hinted at a gradual reduction in interest rates to manage inflationary pressures.

The prospect of the BoE holding rates steady this month has been bolstered by strong job growth and a falling unemployment rate. For the three months ending in July, the unemployment rate dropped to 4.1%, with UK employers adding 265,000 jobs, a significant increase from the previous report of 24,000.

Looking ahead, the key events for the Pound Sterling will be the release of the UK's Consumer Price Index (CPI) data for August and the BoE’s interest rate decision, both set for next week.

Technical Analysis: Pound Sterling holds near 1.3050

The Pound Sterling remains cautious against the US Dollar, staying above 1.3000. The short-term outlook appears uncertain, as the pair has dropped below the trendline established from the December 28, 2023, high of 1.2828. After a sharp rally on August 21, a break below the 20-day Exponential Moving Average (EMA) around 1.3070 has reduced the currency’s appeal.

The 14-day Relative Strength Index (RSI) has dipped into the neutral range of 40.00-60.00, signaling a pause in bullish momentum. Nonetheless, the long-term uptrend is still intact.

Looking ahead, resistance is expected around the key level of 1.3200 and the psychological mark of 1.3500. On the downside, support for the Pound Sterling is seen at the 1.3000 psychological level, which remains crucial for the bulls.