Sterling’s rally following the Fed’s rate cut has quickly unraveled, with GBP/USD closing New York near 1.3558, down –0.53% and close to the session’s low of 1.3534. The slide extends from the flash post-Fed high of 1.3726 as investors repriced rate expectations and gilt yields soared.
Market Context
- Central Bank Actions: The Federal Reserve’s 25 bp cut was paired with cautious messaging from Chair Powell, emphasizing persistent inflation and a resilient labor market. This less-dovish guidance triggered a reversal of dollar weakness.
- BoE Decision: The Bank of England’s 7-2 vote to hold rates steady was expected, but the move to reduce gilt sales underscored concern over fiscal risks from surging long-dated gilt yields, which have hit their highest levels since 1998.
- Rate Expectations: LSEG IRPR shows Fed cuts of ~114 bps priced by end-2026 versus ~43 bps for the BoE, which in relative terms supports sterling, though only if UK fiscal conditions stabilize.
Technical Picture
- Support:
- 1.3534 – Thursday low.
- 1.3479 – rising 100-DMA.
- 1.3402 – daily Ichimoku cloud base.
- Resistance:
- 1.3591 – falling 10-hour moving average.
- 1.3661 – September 18 high.
- 1.3726 – September 17 Fed-day peak.
Daily RSI has slipped from bullish territory, confirming waning momentum. MACD shows bearish crossover, reinforcing downside risks.
Outlook
The near-term bias remains negative while GBP/USD trades beneath the 10-HMA. A sustained break below 1.3534 exposes 1.3479 and possibly 1.3400. On the upside, only a close above 1.3661 would neutralize the bearish structure.