BOE Seen Poised for Further Rate Cuts.Sterling Seen Extending Slide Against Dollar

TradingKey - UK Economy Shows Persistent Weakness as Construction Slump Deepens.The UK economy remains under pressure, with S&P Global’s latest purchasing managers’ index (PMI) released on the 6th showing that construction activity contracted for a ninth consecutive month in September.

Bank of England Governor Andrew Bailey recently signaled the likelihood of further interest-rate cuts, warning that cautious consumers are pulling back on dining out and shopping—signs that leave room for additional monetary easing. Sterling has weakened for a third straight session against the dollar, with the daily chart flashing bearish momentum. The pair may test support around the 1.3250 level in the near term.

S&P Global’s latest purchasing managers’ index (PMI), released on the 6th, showed that UK construction activity contracted for a ninth straight month in September, underscoring persistent weakness in the sector and reflecting businesses’ cautious outlook on the economic horizon.

The index edged up slightly to 46.2 in September from 45.5 in August—the highest reading in three months—but remained well below the 50 mark that separates expansion from contraction, signaling the industry continues to operate firmly in shrinkage territory.

Bank of England Governor Andrew Bailey signaled the prospect of further interest-rate cuts, warning that cautious UK households are pulling back on dining out and shopping. Room for additional easing remains, he said, though the timing and magnitude of any move will hinge on the path of inflation.Notably, signs of softening in the labor market are already emerging, with recent employment data offering early confirmation of the trend.

A majority of Federal Reserve officials backed additional rate cuts before year-end, though markets are gradually pricing in the central bank’s easing trajectory.Minutes from the Fed’s September policy meeting—released this week—shed light on the nuanced deliberations behind the U.S.’s first rate cut of the year. While officials largely agreed on the need to lower rates, they diverged sharply on the pace of easing, with some even expressing reservations about initiating cuts as early as September.

The dollar index is showing signs of having formed a bottom, and after markets have largely priced in the Federal Reserve’s rate-cut expectations, it could halt its decline and resume an upward trend.Meanwhile, sterling is set to remain under pressure against the greenback, with further downside likely.

GBP/USD Technical Analysis

Source: Mitrade — GBP/USD Price Action

Technical Outlook: GBP/USD Extends Downtrend Amid Bearish Signals.From a technical perspective, GBP/USD has been trending lower in a choppy fashion, with bearish momentum firmly in control. The daily chart has formed a classic double-top (M-top) pattern near recent highs, while moving averages have begun to align in a bearish configuration.Adding to the downside bias, the stochastic oscillator remains below the 50 level, with both %K and %D lines turning lower—suggesting further near-term weakness. The pair is likely to extend its range-bound decline, with initial support seen at the 1.3250 level.

On the upside, immediate resistance lies at 1.3450, followed by stronger barriers at 1.3500 and a key ceiling at 1.3600. To the downside, initial support sits at 1.3250, with subsequent floors at 1.3200 and a critical support zone at 1.3150.