The GBP/USD pair has experienced noticeable volatility over the past few days, losing its bullish momentum after a brief two-day rebound, settling near the 1.3370 level during Thursday’s Asian session.
While these levels may appear technically neutral at first glance, a closer look reveals that markets are cautiously awaiting the Bank of England’s (BoE) upcoming announcement amid mounting uncertainty surrounding the future of UK monetary policy.
In my view, this cautious pullback is not just a simple price correction but reflects a deeper concern about a potential shift in monetary direction that could weigh on the pound in the near term.
The widely expected 25-basis-point interest rate cut by the BoE isn’t surprising in itself, but it comes at a time of high economic complexity.
Market consensus suggests a 7–3 vote by the Monetary Policy Committee in favour of the cut, lowering the benchmark interest rate from 4.25% to 4.00%.
In my opinion, while the move may appear logical given the slowdown in UK growth and the retreat of inflationary indicators, it could send a negative signal to the market, indicating that the BoE is embarking on a longer-term easing cycle. This may ultimately cap the pound’s gains against a resilient U.S. dollar.
The situation isn’t isolated to the UK. The global landscape is slowly shifting toward a rate-cutting cycle, driven by uncertainty over a potential broad-based economic slowdown. On the other side of the Atlantic, U.S. markets are also watching closely for signs of what lies ahead for Federal Reserve policy.
President Donald Trump’s recent announcement that he will appoint a new Fed chair to replace Kugler could directly impact the direction of U.S. monetary policy. Following a weaker-than-expected U.S. jobs report, expectations have increased for a 25-basis-point rate cut by the Fed in its September meeting. In my view, the simultaneous easing by both the BoE and the Fed puts investors in a difficult position—the BoE’s rate cut may not significantly affect the pound unless it is coupled with a clear divergence in favour of U.S. monetary tightening.
Additionally, key Federal Reserve officials continue to adopt a cautious stance, adding to the uncertainty. Mary Daly, President of the San Francisco Fed, stated that the fight against inflation is far from over and that the Fed may have to make decisions without full clarity. Similarly, Susan Collins and Lisa Cook stressed that persistent economic uncertainty complicates policy decisions. From my perspective, this hesitation gives the dollar an indirect form of support, as it reinforces its role as a safe-haven asset during periods of market indecision, thereby increasing pressure on the British pound in the short term.
On the flip side, the GBP/USD pair did stage a strong technical rebound in recent days, climbing above 1.3350 after dropping to a 15-week low near 1.3140 last week. This rebound appears to be a logical technical move after the pair hit the 200-day exponential moving average support near 1.3175—a level I view as a short-term indication that the market hasn’t yet abandoned risk appetite on the pound. Still, the move remains fragile without a strong fundamental backdrop, especially if today’s BoE rate cut is confirmed, reinforcing the market’s dovish expectations.
While some may argue that a rate cut is justified due to declining inflation and slowing economic growth, I believe the timing could be counterproductive. Markets are no longer rewarding accommodative policies as enthusiastically as before—particularly in a global environment where central banks are increasingly cautious due to widespread economic uncertainty. Thus, even if the BoE’s move matches market expectations, it could have adverse consequences for the pound if interpreted as a signal of further easing ahead, rather than a one-off adjustment.
What’s more concerning is that this would mark the BoE’s seventh rate cut since July 2024, raising questions about the UK’s ability to escape its growth rut without over-relying on monetary tools. In my opinion, this rapid sequence of cuts reflects more of a structural weakness in the UK economy than a proactive policy approach, which justifies the increasing market scepticism toward the pound. With a solid technical floor at 1.3200, any break below this level could accelerate losses toward 1.3000—or lower—especially if upcoming economic data fails to support the British currency.
In conclusion, I believe the pound is at a critical juncture. Markets are waiting to see whether the BoE will follow the expected path or surprise with a more cautious stance. If the rate cut is unavoidable, the messaging in the accompanying monetary policy report will be more important than the cut itself. Should the report hint at continued easing, that alone could push the pound lower, despite the recent technical support. Conversely, if the decision is framed as a precautionary measure with a balanced tone, the pound might find temporary stability. Ultimately, the three likely scenarios—a cut with a dovish tone, a cut with cautious messaging, or a surprise hold—will determine the pound’s trajectory in the coming weeks, at a time when markets are in dire need of clarity.
Technical analysis of ( GBPUSD ) prices
The GBP/USD pair is showing mixed technical signals within a narrow trading range following a strong rebound from the technical bottom at 1.3140, which represents the fifth wave in the downward Elliott Wave pattern on the 4-hour chart. This technical bounce, reinforced by the formation of a “Morning Star” candlestick pattern following weaker-than-expected U.S. employment data, provided a crucial push for buyers, allowing the pair to break through the 1.3350 resistance level—indicating a temporary shift in momentum toward the upside. However, the price is now facing a key confluence resistance zone at 1.3428, which aligns with the 50-period moving average, making it a pivotal level for determining the next directional move.
