Pound Sterling Rises Against US Dollar as Traders Anticipate Dovish Fed Stance

Key Points:

• The British Pound (GBP) edges higher against the US Dollar (USD) after strong UK Retail Sales and encouraging S&P Global PMI figures.
• Softer U.S. inflation data strengthens expectations of further Federal Reserve rate cuts.
• U.S. President Trump remains optimistic about reaching a trade agreement with China.

Pound Sterling Strengthens on Positive UK Economic Data

The British Pound opened the week with fresh gains, driven by stronger-than-expected economic data from the United Kingdom.

Figures released by the Office for National Statistics (ONS) revealed that Retail Sales rose by 0.5% in September, outperforming expectations of a 0.2% decline. The rise signals renewed consumer confidence and steady spending momentum.

In addition, flash S&P Global PMI data showed signs of resilience in the private sector. The Manufacturing PMI improved to 49.6 from 46.6, indicating slower contraction, while the Composite PMI climbed to 51.1, suggesting modest expansion across manufacturing and services.

Although these results provide short-term encouragement for the Bank of England (BoE), policymakers remain cautious. Business confidence is still historically low, and job cuts continue to weigh on the employment landscape.

Market Dynamics: GBP/USD Rebounds as Dollar Weakens

• The GBP/USD pair recovered after six consecutive days of losses, trading around 1.3350 in early European hours.
• The US Dollar Index (DXY) dipped 0.1%, hovering near 98.80, as market sentiment tilted toward a dovish Fed outcome.
• Based on data from the CME FedWatch Tool, traders widely expect another 25-basis-point interest rate cut to a 3.75%–4.00% range, marking a second consecutive reduction.
• Inflation data from the United States supports this view — the Consumer Price Index (CPI) rose just 0.3% for headline inflation and 0.2% for core inflation in September, showing that price pressures are cooling.

On the international front, trade optimism between the United States and China has further supported the market. President Donald Trump expressed confidence that upcoming discussions with Chinese President Xi Jinping would yield a favorable outcome, stating, “I think we’ll come away with a deal from Xi meeting.”

Meanwhile, US Treasury Secretary Scott Bessent echoed the same tone at the ASEAN Summit in Malaysia, revealing that additional tariffs on Chinese goods could be suspended and export curbs on rare earth minerals postponed.

Technical Overview: GBP/USD Attempts to Break Key Levels

From a technical perspective, the GBP/USD pair is stabilizing around the 1.3310–1.3350 range, near its 200-day Exponential Moving Average (EMA) at 1.3300. This area serves as a crucial pivot point for traders.

The 14-day Relative Strength Index (RSI) currently sits around 40.00, suggesting a neutral tone. A sustained move below this threshold could reignite bearish pressure.

• Key Support: 1.3140 (August 1 low)
• Key Resistance: 1.3500 (psychological barrier)

If momentum holds above 1.3350, the pair could confirm a near-term bullish shift, particularly if the Fed signals further policy easing later this week.

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