Sterling advanced for a third straight session, buoyed by weaker U.S. data and a softer dollar. GBP/USD ended the New York afternoon up 0.3% at 1.3480, trading within a tight 1.3485–1.3430 range. A soft U.S. ISM non-manufacturing print added weight to the narrative that U.S. “exceptionalism” may be waning, encouraging renewed sterling demand.
Market Drivers
- Dollar Weakness: The ISM miss pushed U.S. yields lower, diminishing the dollar’s near-term appeal.
- Rate Path Divergence: LSEG IRPR data shows a more dovish Fed than BoE through 2026, with cumulative Fed cuts priced at –112 bps vs –43 bps for the BoE. This spread remains sterling-positive.
- Political & Fiscal Risks: Ahead of the Nov. 26 Autumn Budget, concerns linger about the UK’s stretched deficit and persistent inflation. Gilt yields have eased slightly, but fiscal credibility remains key for medium-term sentiment.
Technical Landscape
- Support:
- 1.3430 – Friday low.
- 1.3418 – daily cloud base.
- 1.3362 – lower 30-day Bollinger Band.
- Resistance:
- 1.3485 – Friday high.
- 1.3505 – flat 21-DMA.
- 1.3526 – Oct 1 daily high.
- Momentum Indicators: RSI is trending higher but remains neutral, reflecting controlled bullish momentum. MACD histogram has turned positive, suggesting upside follow-through potential.
Outlook
The near-term trend favors sterling while above 1.3430. A sustained break through 1.3505–1.3526 would confirm a bullish continuation pattern, paving the way toward 1.3660 and potentially the September high at 1.3787. Conversely, a close below 1.3418 would indicate the rally is losing steam, with risk of retreat to 1.3360.
