The British pound (GBP/USD) spent most of Tuesday moving sideways, despite the release of weaker-than-expected UK services and manufacturing PMI data. Both indices not only declined in September but also came in significantly below forecasts. Under normal circumstances, this would have fueled further selling pressure on the pound, especially since the pair had already been falling for several consecutive days. However, the currency managed to hold its ground, suggesting that the correction phase may be nearing an end.
The pound’s earlier decline was primarily driven by renewed budget concerns in the UK, alongside weakness in the euro, which spilled over into sterling. Fundamentally, the latest Federal Reserve meeting carried a dovish tone, signalling readiness for further rate cuts, while the Bank of England’s stance was more neutral. Some market participants interpreted the BoE’s position as slightly dovish, but given persistent inflation nearly double the 2% target, the likelihood of additional aggressive easing is questionable. Another rate cut risks fuelling inflation further, which would undermine the Bank of England’s credibility in inflation targeting.
Budget imbalances remain a challenge for the UK economy. Rising government spending paired with sluggish revenue growth leaves the BoE in a difficult position: further monetary easing risks driving inflation even higher, while tightening could add to already weak economic growth. Nonetheless, compared to U.S. conditions, where fiscal and trade concerns continue to weigh on the dollar, the pound may remain comparatively supported in the medium term.
From a technical standpoint, GBP/USD has an average volatility of 89 points over the past five sessions, which is considered moderate. For Wednesday, September 24, the expected trading range is between 1.3427 and 1.3605. The senior linear regression channel points upward, signaling an ongoing uptrend, while the CCI indicator has again dipped into the oversold zone, suggesting a possible resumption of bullish momentum.
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Support levels: 1.3489, 1.3428, 1.3367
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Resistance levels: 1.3550, 1.3611, 1.3672
Trading Recommendations: As long as GBP/USD holds above the moving average, long positions remain preferable, with targets at 1.3672 and 1.3733. If the price falls below the moving average, small short positions can be considered, but only on a technical basis. Broader fundamentals continue to favour pound strength against the dollar, as U.S. policy and fiscal uncertainties limit the dollar’s ability to mount a sustained recovery.
