Pound Sterling Rebounds as GBP/USD Recovers From Three-Day Decline

The Pound Sterling (GBP) recovered slightly on Monday, snapping a three-day losing streak against the US Dollar (USD). The GBP/USD pair climbed back toward the 1.3500 level, supported by a softer US Dollar Index (DXY), which eased from a one-week high of 97.80.

Fed Rate Cut Supports US Dollar Outlook

Last week, the Federal Reserve cut interest rates by 25 basis points, bringing the target range to 4.00%–4.25%. While rate cuts usually weaken the dollar, markets had already priced in the move, allowing the USD to remain resilient.

Traders now shift their attention to Fed Chair Jerome Powell’s speech on Tuesday at the Greater Providence Chamber of Commerce’s 2025 Economic Outlook Luncheon. Investors also await comments from FOMC officials, including Stephen Miran, who supported a larger 50-bps cut.

Meanwhile, upcoming US PMI data will guide sentiment. The Composite PMI is expected to remain steady at 54.6, signaling stable economic growth despite labor market weakness.

UK Fiscal Debt Remains a Headwind for Sterling

Despite Monday’s rebound, concerns over UK fiscal debt weigh heavily on the Pound. Official figures showed public sector net borrowing jumped to £18 billion in August, well above forecasts of £12.5 billion.

This surge pushed 30-year UK Gilt yields to 5.57%, raising fears about the government’s borrowing costs. Investors are also concerned that Chancellor Rachel Reeves may introduce tax hikes in the Autumn Budget to offset increased public spending.

On Tuesday, traders will focus on the UK S&P Global Services PMI, expected to ease from 54.2 to 53.6, hinting at slower momentum in the UK economy.

GBP/USD Technical Analysis

From a technical view, GBP/USD remains bearish below the 20-day Exponential Moving Average (EMA) at 1.3524. Key support is located near 1.3140 (August 1 low). On the upside, resistance stands at 1.3800 (July 1 high).

The Relative Strength Index (RSI) sits below 50. A move under 40 could trigger further downside pressure. For now, Sterling needs to break above the 20-day EMA to shift momentum in its favor.

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