The Pound Sterling (GBP) extended its losing streak for a fifth straight session on Friday, sliding toward the 1.3400 level against the US Dollar (USD). The Greenback’s firm tone comes as traders scale back expectations for a September rate cut by the Federal Reserve, pushing the US Dollar Index (DXY) to a fresh 10-day high near 98.80.
The shift in sentiment follows easing dovish bets, with the CME FedWatch Tool now reflecting a 73.3% probability of a 25-basis-point cut next month, down from 85.4% a week earlier.
Markets Brace for Powell’s Speech
All eyes are now on Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, scheduled for 14:00 GMT. Powell is widely expected to reiterate that the Fed will maintain its cautious stance until there is greater clarity on inflation dynamics and the economic impact of ongoing US tariff adjustments.
Analysts at Saxo noted, “With another inflation and payrolls print still due before the September meeting, Powell has every reason to stay patient and keep optionality open.”
Adding to the cautious tone, Kansas City Fed President Jeffrey Schmid emphasized on Thursday that policymakers are in “no hurry” to cut rates, citing persistent inflation closer to 3% rather than the 2% target.
UK PMI Data Provides Limited Support
While GBPUSD remains under pressure, upbeat UK flash PMI data for August offered some relief for the British Pound. The Composite PMI jumped to 53.0, beating estimates and signaling robust expansion in the services sector.
Key takeaways from the PMI report include:
Services sector strength continues to offset weaker manufacturing output.
New business demand returned to growth after a modest decline in July.
Cost pressures remain high, with firms raising prices to counter higher National Insurance costs.
However, labor market weakness highlighted by continued layoffs combined with sticky inflation leaves the Bank of England (BoE) in a difficult position ahead of its September policy meeting.
BoE Faces a Balancing Act
The BoE’s August policy meeting delivered a 25-bps rate cut to 4%, with officials signaling a gradual and careful easing approach. Yet, persistent inflation complicates the path forward.
This week’s UK CPI report for July showed both headline and core inflation accelerating to 3.8% year-over-year, surpassing projections and highlighting lingering price pressures in the economy.
For the BoE, this means balancing weak labor demand with elevated inflation risks, making the upcoming decision critical for GBP traders.
Geopolitical Backdrop Adds Uncertainty
Adding another layer of uncertainty, geopolitical tensions are back in focus. Russia launched a large-scale overnight attack on Kyiv Thursday, undermining hopes of progress toward a ceasefire.
This comes after US President Donald Trump met Ukrainian President Volodymyr Zelenskiy earlier this week, following talks with Russian President Vladimir Putin on August 15. Despite diplomatic efforts, Ukraine signaled frustration, with Zelenskiy remarking that signals from Moscow are “simply indecent.”
Such instability tends to favor the US Dollar as a safe-haven currency, applying additional pressure on Pound.
Technical Outlook: GBPUSD Under Pressure
From a technical perspective, GBPUSD remains vulnerable below 1.3450, with sellers eyeing a deeper test toward 1.3350 support if Powell’s speech fuels further dollar strength.
Immediate resistance: 1.3450–1.3480 zone
Key support levels: 1.3400 psychological handle, followed by 1.3350
Bias: Bearish below 1.3480, with momentum favoring further downside
Key Takeaways for Traders
Dollar strength is likely to persist if Powell signals a patient Fed stance.
BoE’s cautious policy tone and sticky inflation create medium-term headwinds for GBP.
Geopolitical tensions may continue to support USD safe-haven flows.
Conclusion
The Pound Sterling remains on the back foot as US Dollar momentum dominates ahead of Powell’s highly anticipated speech at Jackson Hole. While upbeat UK PMI data offered some support, inflation concerns, labor market fragility, and a cautious BoE continue to weigh on the currency.
Traders will closely monitor Powell’s remarks for clues on the Fed’s September decision, with GBPUSD likely to remain volatile as markets adjust to shifting policy expectations and ongoing geopolitical risks.
