The Pound Sterling steadied against the Dollar on Monday, trading at 1.3357 after a daily low of 1.3328, as broad US Dollar strength offset softer bets on the Federal Reserve. Political uncertainty in the UK over the next Chancellor could keep the pair range-bound around 1.3300-1.3400.
The Pound held its range on Monday as US Dollar demand met fresh doubts about the Fed's path, with GBP/USD trading at 1.3357 after touching a daily low of 1.3328. The week opened in a risk-off mood, evidenced by overall US Dollar strength in the FX market, even as traders trimmed hawkish Fed bets.
Dollar demand offsets a softer Fed repricing
Last week's US jobs report missed estimates, and figures for April and May were revised down, prompting a repricing toward a less hawkish Federal Reserve. Even so, the Unemployment Rate sits within the 4.5% level that officials pencilled in for later in the year.
Money markets had priced 22 basis points of tightening for year-end, according to Fed funds futures. For the July meeting, Prime Terminal data show a 77% chance the Fed keeps rates unchanged, against a slim 23% chance of an increase. Meanwhile, the ISM Services PMI came in at 54.0, as expected but down from 54.5, while the Services Employment Index improved from 47.9 to 51.2.
BoE bets and UK politics anchor Cable
Across the Atlantic, the UK calendar was light, yet the Pound stays underpinned by a slight chance of a single Bank of England rate hike toward year-end. A month ago money markets priced at least 44 basis points of tightening; as of writing, the swaps market prices 17 basis points, implying a 70% chance of a hike. Last week, BoE Governor Andrew Bailey disregarded the chance to consider rate cuts, even as the energy shock subsided.
Politics may matter more in the near term. Newswires reported a 55% chance that Ed Miliband, a former energy minister, is tapped as Chancellor to succeed Rachel Reeves. Until a pick is confirmed, the pair could consolidate around 1.3300-1.3400.
Technical picture stays mildly bearish
On the daily chart, GBP/USD trades at 1.3365 with a mildly bearish bias, capped below a simple moving average cluster near 1.3406 and a descending trend line around 1.3513. The 14-day RSI hovers near 55, pointing to only modest upside momentum. A break of rising support near 1.3159 would likely expose a deeper retracement within the broader range.
Source: FXStreet
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