03/11/25

60

The GBP/USD currency pair remains under pressure, driven by a combination of domestic and international factors that continue to dampen investor sentiment towards the British Pound. The pair has yet to establish a meaningful bid early in the week, holding close to the lows seen in mid-May, with uncertainty surrounding the UK’s fiscal outlook contributing to the subdued tone.

In the United States, political gridlock has resulted in a government shutdown that has now persisted into its 33rd day. The deadlock in Congress, primarily over funding legislation, has created concerns about potential economic disruptions. President Trump’s recent calls for Senate Republicans to end the shutdown by eliminating the filibuster have added to the political uncertainty. Despite this, the US dollar remains relatively resilient, supported by the Federal Reserve’s hawkish stance. The Fed’s signals towards maintaining or even increasing interest rates have helped sustain the dollar’s strength near three-month highs, although the ongoing shutdown has limited a more pronounced rally.

On the UK front, fiscal concerns and expectations of possible Bank of England rate cuts are weighing heavily on the Pound. The Office for Budget Responsibility is anticipated to reduce its UK productivity forecasts, potentially exacerbating the budget deficit and intensifying fiscal pressure on Chancellor Rachel Reeves. With public finances already showing a shortfall of around £22 billion, further fiscal tightening or borrowing may be necessary. Meanwhile, market pricing indicates a roughly 70% probability that the BoE will reduce interest rates in December, following softer economic data on inflation, employment, and output. However, given that inflation remains significantly above the target, a rate cut at this week’s policy meeting appears unlikely, although future policy signals will likely influence near-term sentiment.

Looking ahead, investors will focus on key economic releases and central bank communications, which could impact the USD and GBP movements. Technicals suggest that recent declines below critical support levels have reaffirmed a bearish outlook, with the pair poised to challenge additional support around 1.3065 to 1.3060. A sustained move below this zone could open the door for further downside, targeting 1.3000. Conversely, a move above recent resistance near 1.3150 may trigger short-term recoveries, but any advances are likely to encounter stiff resistance around the 200-day moving average in the mid-1.3200s. The upcoming sessions thus promise continued volatility amid uncertain fundamental developments.