GBP/USD was observed trading around 1.3148, showing a slight recovery from a daily low of 1.3094, as market participants processed a combination of U.S. political stagnation, disappointing employment figures, and the Bank of England’s accommodative position. The pair experienced a 0.10% increase intraday; however, it continues to be trapped in a delicate consolidation phase after its unsuccessful attempt to regain the 200-day SMA at 1.3261. The current market sentiment indicates significant uncertainty, as evidenced by the U.S. Dollar Index fluctuating near 99.85, a decline from its six-month peak of 100.36. Additionally, the Federal Reserve’s cautious approach is constraining bullish confidence in the dollar. The U.S. labor market surprised traders as companies reduced their workforce by 153,000 jobs in October, representing the most significant single-month decline in twenty years. The release indicated a deceleration in economic activity, bolstering anticipations that the Federal Reserve will implement an additional rate cut in December 2025. Fed Vice Chair Philip Jefferson emphasized the need for rate reductions to occur “slowly” as policy approaches neutrality, while acknowledging that the shutdown’s data blackout necessitates a “meeting by meeting” approach to policymaking. The University of Michigan’s Consumer Sentiment Index has declined to 50.3 from 53.6, falling short of expectations. Inflation expectations increased to 4.7% for the 1-year period, whereas the 5-year expectations decreased to 3.6%. The White House Council of Economic Advisers has indicated that GDP may contract by 1.0–1.5% this quarter if the shutdown continues, thereby increasing downside risks for the USD.
The Bank of England has decided, with a vote of 5–4, to keep interest rates steady at 4.00%. This decision reflects an increasing unease regarding further tightening in the context of sluggish domestic demand. Governor Andrew Bailey highlighted a “softening labor market” and “waning wage momentum,” cautioning that inflation progress could face challenges in early 2026. UK GDP growth projections are positioned around 0.2% QoQ, with consumer spending showing little movement, thereby exerting pressure on Sterling sentiment. The markets have incorporated expectations for two rate cuts in the first half of 2026, a development that diminishes the Pound’s prior strength. Despite a brief surge to 1.3160, the GBP/USD pair continues to be constrained beneath the descending trendline at 1.3180, as sellers are actively protecting that level. The DXY index’s rebound to 99.85 appears lackluster in comparison to the surge observed in October. The prolonged U.S. government shutdown — currently the longest on record — persists in constraining federal output data and undermining consumer confidence. The University of Michigan survey indicated that more than 60% of participants anticipate a decline in their personal finances should the shutdown continue. The Federal Reserve’s inconsistent messaging exacerbates the fluctuations of the dollar. St. Louis Fed President Musalem recognized the ongoing nature of inflation but anticipated that tariff-induced pressures will diminish by the following year. His remarks, along with Jefferson’s prudence, create uncertainty among traders regarding whether the Fed will shift its stance decisively or maintain a cautious approach until December.
From a technical perspective, GBP/USD is firmly positioned within a short-term bearish framework. The pair is currently positioned beneath its 50-day EMA at 1.3150, which remains a significant level of dynamic resistance. The RSI at 45 indicates a decline in momentum after the late-week rebound, implying potential exhaustion of upward movement around 1.3180. Critical resistance levels are identified at 1.3150–1.3180 and 1.3240 (trendline cap). On the downside, 1.3040 and 1.2980 represent key support levels, with 1.3000 serving as a psychological anchor. A clear decline beneath that threshold paves the way to 1.2920 — levels not observed since April. On the other hand, a daily close above 1.3240 would negate the bearish outlook and potentially lead to a movement toward 1.3330–1.3400. This week’s heat map indicates that GBP is the strongest against the NZD (+2.22%), while it shows weakness against JPY (-0.52%) and CHF (-0.13%). Against the USD, Sterling shows a slight increase of 0.16%, indicating a delicate balance in the market. The USD/CAD pair experienced a decline of 0.27%, whereas the EUR/USD saw an increase of 0.22%. This indicates that the overall weakness of the dollar is primarily due to domestic challenges within the U.S., rather than any significant strength from foreign currencies. Sterling’s underperformance against low-yielders such as CHF underscores the fact that rate expectations, rather than macro growth, are the primary drivers of short-term flows.
The prolonged U.S. political impasse has increased risk aversion, resulting in a decline in Treasury yields. The 10-year yield decreased to 4.03%, whereas the 2-year note is trading around 4.38%, indicating the market’s strong belief that a Fed cut is on the horizon. The estimated cost of the shutdown stands at $9.4 billion per week, contributing to a cumulative drag that diminishes the attractiveness of the dollar, even as investors seek refuge in gold and yen. For GBP/USD, these conditions suggest temporary rallies, as neither side presents a compelling growth outlook. The Pound’s correlation with global risk sentiment has increased to 0.71, indicating that Sterling is now behaving more like a “risk asset” rather than a conventional safe-haven currency. The 200-day SMA (1.3261) establishes the maximum threshold for recovery potential. The 21-day EMA around 1.3115 serves as a critical short-term pivot point. MACD differentials indicate a diminishing bear trend; however, in the absence of volume confirmation, bullish participants exercise caution. A daily close above 1.3180 could initiate stop hunts reaching 1.3240; however, persistent pressure around 1.3040 indicates that sellers continue to hold the upper hand. Intraday volatility continues to be high — the 14-day ATR at 0.0062 (≈62 pips) indicates significant two-way movement, which is common in times of macroeconomic uncertainty. The macroeconomic disparity between the UK and US remains a key factor in shaping investment strategies. The UK economy is showing minimal growth, as evidenced by the manufacturing PMI at 49.2, indicating contraction, while the services PMI stands at 51.1, reflecting stagnation. Meanwhile, the US ISM Services Index decreased to 49.8, marking the first sub-50 reading since May 2024, indicating a synchronized slowdown on both sides of the Atlantic.
Nonetheless, the Fed’s possible rate cut in December compared to the BoE’s easing timeline in 2026 may provide short-term support for Sterling, which accounts for GBP/USD’s inability to decisively fall below 1.3000 despite ongoing selling pressure. Liquidity is currently limited as a result of the US Veterans Day holiday, leading to increased volatility. Institutional traders are preparing for potential volatility spikes in light of the forthcoming UK GDP release and BoE testimony, events that may significantly influence short-term rate pricing. Derivatives positioning indicates that GBP/USD futures net shorts have decreased by 6,000 contracts, suggesting a degree of profit-taking among dollar bulls. Options skew data indicates an implied volatility of 7.8%, marking the highest level in four months. The risk reversal stands at +0.24, favoring calls, which suggests that hedgers perceive limited downside risk in Sterling. Despite short-term recoveries, GBP/USD continues to exhibit structural weakness beneath 1.3180, with downside objectives positioned around 1.3040 and 1.2980. The macroeconomic environment — characterized by weak US employment figures, an extended government shutdown, and the Bank of England’s dovish stance — indicates potential for intermittent volatility, yet does not favor sustained strength. The currency pair is projected to fluctuate within the range of 1.2980–1.3240, presenting potential selling opportunities during upward movements. Momentum continues to exhibit a bearish trend until a daily close surpasses the 200-day SMA (1.3261) accompanied by volume confirmation.