The Pound Sterling is gaining ground due to widespread weakness in the US Dollar as the US government reopens, which will reveal a series of economic data for traders and the Federal Reserve. GBP/USD is currently positioned at a two-week peak of 1.3197, reflecting an increase of 0.46%.
GBP/USD reaches a two-week peak at 1.3197 as market participants respond to the renewed US government funding and enhanced sentiment. In September, the UK GDP experienced a contraction of 0.1% month-over-month, which increases the likelihood of an 80% chance for a rate cut by the Bank of England in the upcoming meeting. The medium-term outlook for Sterling remains fragile due to political tensions surrounding PM Keir Starmer and the uncertainty of the upcoming budget.
> Sterling appreciates amid Dollar’s decline following the reopening of the US government : While economic data releases in the US are currently limited, an increase is anticipated in the upcoming week. According to the Edward Lawrence, the Nonfarm Payrolls report for September is anticipated to be released next week. The reopening of the US government allows for the release of funds to government offices; however, traders express skepticism due to the Trump administration’s looming threat of another shutdown at the end of January. Federal Reserve officials remain in the spotlight, with Cleveland’s Beth Hammack expressing concerns about the labor market while anticipating persistent high inflation. Mary Daly noted that uncertainty has lessened, stating that it is too early to determine if a cut will occur in December. In the UK, Gross Domestic Product indicates a decline in economic performance, heightening the likelihood of a rate cut by the Bank of England at the upcoming meeting next month. Preliminary growth figures in September showed a contraction of 0.1% MoM, falling short of the forecasted 0%. In the twelve months to September, GDP increased by 1.3%, falling short of estimates and the prior month’s figure of 1.4% YoY.
Following the data release, expectations for a 25 basis point reduction in the Bank Rate by the BoE are approaching 80%. Market participants are anticipating a 50 basis point reduction in 2026, while closely monitoring the upcoming Autumn Budget release on November 26. Experts referenced, “We expect the Pound to weaken further if the market moves to price in a higher political risk premium,” as political turmoil envelops Prime Minister Keir Starmer, amid speculation of a conspiracy to remove him. The GBP/USD technical outlook indicates that the current upward correction is likely to encounter significant resistance at 1.3200, with the 20-day SMA positioned at 1.3221 as the next level of interest. A daily close above those levels paves the way to reclaim the 200-day SMA at 1.3275. Nonetheless, bearish momentum is evident, as illustrated by the Relative Strength Index. For a bearish resumption, sellers need to breach 1.3100 to pose a threat to the 1.3000 milestone.