- Pound Sterling (GBP) rises to nearly 1.3450 amid concerns about potential US government shutdowns.
- Democrats are urging Republicans to reverse cuts to healthcare funding.
- Boe’s Ramsden is advocating for interest rate cuts to address declining employment demand.
During Tuesday’s European trading session, Pound Sterling (GBP) was up to about 1.3450 against the US Dollar (USD). This surge occurred as the US dollar displayed caution, driven by worries of a possible US government shutdown. Republicans are finding it challenging to persuade Democrats to back a short-term funding bill before Tuesday’s deadline.
The US Dollar Index (DXY), which measures the dollar against six major currencies, slipped slightly to around 97.80.
Comments from Vice President JD Vance on CNBC revealed a heightened risk of a partial US government shutdown. After discussions with Democrats, he stated, “I think we’re heading for a shutdown because Democrats aren’t doing the right thing.”
In response, Democrats have declined to support the Senate’s Stop Gup bill, hoping the White House will reconsider the cuts to healthcare benefits introduced earlier in the year.
In a related note, the U.S. Department of Labor and Commerce warned that if there’s a partial shutdown at the statistical agency, scheduled releases of crucial economic indicators, such as the official employment figures for September, might be paused.
Pound Sterling under pressure as Beau’s Ramsden indicates labor market risks
- Pound Sterling faced some selling pressure on Tuesday. The UK currency dipped slightly as Lieutenant Governor Dave Ramsden of the Bank of England (BOE) expressed support for lowering interest rates amid growing concerns about the UK’s labor market. He remains optimistic that inflationary pressures will emerge again as interest rates are still somewhat constrained.
- On Monday, during a panel organized by the European Central Bank (ECB) in Frankfurt, Ramsden noted that the labor market is showing signs of easing alongside wage growth. According to reports, he indicated support for the ongoing core disinflation process, which influences his inflation outlook.
- Ramsden’s endorsement of interest rate reductions could negatively impact the pound, as he was part of the majority in the Monetary Policy Committee (MPC) who voted to keep the policy rate at 4% during the September meeting.
- On the economic front, UK GDP data for the quarter was better than initially projected, showing growth of 1.4%, surpassing an earlier estimate of 1.2%. The growth rate aligns with a flash estimate of 0.3%.
- For the session on Tuesday, the August US Jolts Job Openings data set to be released at 14:00 GMT will be a key indicator for the GBP/USD pair, with expectations of around 7.1 million job listings—similar to the previous figure of 7.18 million.
Technical Analysis: Pound Sterling positioned below 20 days EMA
Pound Sterling was slightly above 1.3450, barely exceeding the US dollar on Tuesday. Nevertheless, the overall outlook remains bearish as it trades below the 20-day exponential moving average (EMA) at about 1.3483.
The 14-day relative strength index (RSI) has bounced back up from 40.00 to around 46.
In terms of support, the lowest point of 1.3140 from August 1 serves as a critical level. Conversely, the peak of 1.3726 on September 17 stands as a significant resistance point.
