British Pound falls as Sterling bulls face Fed decision and UK budget tests

• GBP/USD sheds 0.22% to trade at 1.3342 amid firmer Dollar demand.
• A Fed rate rise carries a 9% probability for October, compared with 83% for December.
• Markets fully price in a November BoE rate rise ahead of the UK Autumn Budget.

A decline of around 0.22% leaves GBP/USD trading at 1.3342, with the Pound Sterling giving ground to the US Dollar. Traders await the Federal Reserve’s monetary policy decision at its Tuesday and Wednesday meeting, while preparing for the UK’s Autumn Budget.

Pound slips as stronger Dollar and UK fiscal uncertainty outweigh BoE rate-rise speculation

Alongside geopolitics, enthusiasm for AI remained a driver of market moves, with Anthropic’s IPO filing lifting the Nasdaq. Sterling also faces pressure from the US Dollar Index (DXY): the gauge, which measures the Dollar against six currencies, has gained 0.24% to 101.99.

With few US economic releases last week, the Middle East conflict and technology shares set the tone for trading. Expectations of a Federal Reserve rate rise at the two-day meeting concluding this Wednesday faded, leaving the probability at 9%. According to Prime Terminal, the likelihood of a December increase also fell, from around 90% last week to just 83% at the time of writing.

Energy prices, meanwhile, are easing as senior regional diplomats travelled to Iran in an effort to defuse mounting tensions. Speculation about a possible US-Israel strike on Tehran subsided after US President Donald Trump said on Sunday that he would not attack Iran.

A technology-led market sell-off put the US Dollar under selling pressure last week. The fragile AI-driven rally and wider appetite for risk also face a test from corporate results due from major cloud computing providers Alphabet GOOGL.O, Microsoft MSFT.O and Amazon AMZN.O.

Attention in the UK centres on Chancellor of the Exchequer John Healey as he prepares to unveil his budget. His priority is to steady the UK bond market amid concerns over the substantial spending measures discussed by the new Prime Minister Andy Burnham when he took office.

For the Bank of England, expectations of a rate increase on 5 November depend on robust economic releases that demonstrate the economy’s resilience.

A 25-basis-point increase had been fully priced into money markets, with an implied probability of 100%. Such a move would reduce the US-UK interest rate differential to zero, suggesting scope for GBP/USD to recover over the coming weeks if Fed Chair Kevin Warsh does not adopt a hawkish tone.

The forthcoming US calendar includes Durable Goods Orders, housing and employment figures, and the Conference Board Consumer Confidence reading.

GBP/USD Price Forecast: Moving averages keep the technical bias bearish

At 1.3344 on the daily chart, GBP/USD remains below the cluster of 50-, 100- and 200-day simple moving averages (SMAs) near 1.3400, maintaining a bearish short-term bias. The pair also sits beneath key upward trend-line breaks at 1.3640 and 1.3820. Although the Relative Strength Index (14) has climbed towards the neutral 52 area as momentum improves, this points only to an easing of downward pressure. With those technical barriers still overhead, a clear change in trend has yet to emerge.

The first upside hurdle lies at the downward-sloping trend-line break around 1.3397, followed by the tightly grouped SMAs near 1.3400. Only a daily close above that cluster would temper the bearish bias and clear a path towards 1.3640 and 1.3820. Initial support, meanwhile, comes from the former resistance trend line, now acting as a floor around 1.3260. A sustained break beneath it would probably renew selling pressure, bringing lower levels within the broader range into view.

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