British Pound loses ground as markets brace for Fed, BoE monetary decisions

• British Pound retreats against a resurgent US Dollar on Monday.
• Investors brace for monetary policy decisions in the US on Wednesday and the UK on Thursday.
• Markets widely expect a Fed rate hike, while the BoE is set to leave rates unchanged.

GBP/USD extends its decline on Monday and trades around 1.3470 at the time of writing, down 0.38% on the day. The pair falls to the lower end of its monthly range, weighed down by renewed demand for the US Dollar (USD) ahead of several major monetary policy decisions.

Investors’ attention is primarily focused on the US Federal Reserve (Fed) meeting, with its interest rate decision due on Wednesday. Expectations of tighter monetary policy have strengthened following the latest US inflation data. According to the CME FedWatch tool, markets are pricing in around an 88% chance of a 25-basis-point rate hike this week.

Beyond the decision itself, investors will closely monitor Fed Chair Kevin Warsh’s press conference for fresh clues about the future path of US interest rates. A message leaving the door open to further rate increases could provide additional support to the US Dollar and keep GBP/USD under pressure.

On the UK side, the Bank of England (BoE) will announce its monetary policy decision on Thursday. Most economists expect the central bank to leave its policy rate unchanged at 3.75%. BoE Governor Andrew Bailey recently sought to temper expectations of an automatic tightening of monetary policy, stressing that any future rate increase would depend on economic and geopolitical developments.

British Pound (GBP) nevertheless finds some support from relatively solid UK economic data. The UK Gross Domestic Product (GDP) expanded by 0.4% in July, beating expectations for stagnant activity. Industrial Production also surprised to the upside, while services activity proved stronger than expected.

Despite these encouraging figures, GBP/USD remains primarily driven by monetary policy expectations at the start of the week. The Fed’s decision on Wednesday and the BoE’s announcement on Thursday, along with their respective guidance on the future path of interest rates, are likely to determine whether the US Dollar can maintain its recent advantage or the British Pound can regain ground.

GBP/USD technical analysis

In the one-hour chart, GBP/USD trades at 1.3472, retaining a bearish near-term bias as the pair holds beneath both the 100-period simple moving average (SMA) at 1.3529 and the 200-period SMA at 1.3524. A downward-sloping resistance trend line, whose break level comes in around 1.3517, continues to cap recovery attempts, while the Relative Strength Index (14) slips into oversold territory near 29, hinting that selling pressure is stretched but not yet reversed.

On the topside, initial resistance is located at the horizontal barrier around 1.3480, followed by the trend-line break area at 1.3517 and then the 200-period SMA at 1.3524, with the 100-period SMA at 1.3529 reinforcing a broader supply zone overhead. On the downside, immediate support is seen at 1.3464, ahead of a lower horizontal floor near 1.3434, where a deeper pullback could pause if bears extend control.

(The technical analysis of this story was written with the help of an AI tool. Know more.)