The Pound Sterling (GBP) has seen a 0.4% decrease, settling near 1.3420 against the US Dollar (USD) during Monday’s European trading session. This downward trend is attributed to significant selling pressure as the US Dollar has made a notable comeback, despite looming concerns that a partial US government shutdown could lead to widespread layoffs. The US Dollar Index (DXY), which measures the currency’s performance against a basket of six major currencies, has risen by 0.55%, reaching approximately 98.25.
Over the weekend, indications from the White House suggested that mass layoffs of federal employees could be imminent if the Senate fails to pass a short-term funding bill. National Economic Council Director Kevin Hassett shared on CNN’s “State of the Union” that both President Donald Trump and White House budget director Russ Vought are preparing for potential actions but remain hopeful for a resolution to avoid such drastic measures.
The political landscape appears tense, with Republicans struggling to convince Democrats to support the stopgap funding bill. The Democrats demand a permanent extension of enhanced premium tax credits designed to assist Americans in obtaining private health insurance through the Affordable Care Act. Reports indicate that Democrats are also seeking assurances that the administration will not attempt to unilaterally alter any previously agreed-upon spending measures. As senators reconvene on Monday, indications suggest that a compromise on the funding bill remains elusive. Democratic Senator Ruben Gallego succinctly stated, “At this point, no,” when asked if lawmakers were close to an agreement.
In currency markets, the table below indicates the percentage changes of the US Dollar against other major currencies today. The Greenback has shown strength particularly against the Japanese Yen.
Amid this backdrop, the Pound Sterling’s performance against its peers remains mixed, as investors await remarks from Bank of England (BoE) Governor Andrew Bailey at the Global Investment Summit 2025 in Edinburgh. Observers are keen to hear Bailey’s insights regarding potential interest rate cuts for the remainder of the year, especially as the financial community anticipates a precarious balance in future policy decisions due to persistent inflation pressures and a cooling labor market.
Recent communications from BoE officials have hinted that inflation may peak around 4% by September, with Deputy Governor Clare Lombardelli and MPC member Catherine Mann suggesting that recent inflation shocks should not be dismissed as temporary. Additionally, the BoE’s Decision Maker Panel (DMP) survey revealed a slight uptick in one-year forward CPI inflation expectations among UK firms, now at 3.5%.
On the economic front, the revised UK S&P Global Purchasing Managers’ Index (PMI) report for September indicated slower growth in service sector activities than previously projected. The Services PMI registered at 50.8, below the preliminary forecast of 51.9, and significantly down from August’s figure of 54.2.
From a technical perspective, the Pound Sterling currently faces pressure around its 20-day Exponential Moving Average (EMA), which is positioned at approximately 1.3476. The pair is trading within Friday’s range and appears to be struggling to reclaim its status above this crucial EMA. The 14-day Relative Strength Index (RSI) remains within the 40.00-60.00 range, suggesting a sideways trend. Key support for the Pound is identified at the August low of 1.3140, while resistance is anticipated at the September high of 1.3726.
