British Pound loses grip on 1.34 as Fed hawks stay in charge

• GBP/USD fades from 1.3400 as Dollar retains policy advantage.
• Goolsbee warns persistent supply shocks may require painful tightening.
• Falling Oil tempers inflation fears but fails to lift Sterling.

The Pound Sterling retreats by some 0.17% on Monday as the Greenback trades in the green following last week’s Fed rate hike, which widened the interest rate differential between the US and the UK, while still-high energy prices put pressure on major central banks to raise rates. The GBP/USD trades at 1.3371, after reaching a high of 1.3400.

Sterling retreats as widening rate gap outweighs improving risk sentiment

Market mood is positive, which usually underpins the GBP/USD pair, but hawkish comments by Chicago Fed President Austan Goolsbee dented appetite for Sterling.

Goolsbee said that they (Fed) can’t ignore repeated and consistent supply shocks and that they must respond in a way that may cause economic hardship. He commented that the path to bringing inflation back to the 2% goal may not be painless.

His comments come after Fed’s last meeting in which the central bank increased rates to 3.75%-4% for the first time in three years and opened the door to further tightening. Fed Chair Kevin Warsh said they removed a dose of accommodation, easing the hawkish tone, but money markets still expect additional rate hikes in 2026.

Hopes of diplomatic de-escalation between the US and Iran pushed West Texas Intermediate (WTI) - the US crude benchmark - down over 3% for the day. Oil fell after US President Trump said he would be open to meeting his Iranian counterpart, who is expected to attend the UN General Assembly this week.

Conversely, the Bank of England (BoE) held rates steady at 3.75% on a 6-3 vote, even though the board recognised that the continuation of the US-Iran conflict could exert upward pressure on inflation, prompting a BoE response.

The economic docket in the US and the UK would be scarce, led by the release of Flash PMIs and central bank speakers. The agenda will include the Trump-Xi summit in the US, starting on Thursday, September 23.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3373, retaining a bearish near-term bias as it holds below the clustered 50-, 100- and 200-day simple moving averages (SMAs) around 1.3482 and beneath the broken upward trend-line levels at 1.3500 and 1.3710. The pair has slipped back toward the prior downtrend break point at 1.3338, while the Relative Strength Index (14) near 35 suggests waning downside momentum rather than an outright oversold condition, hinting that any recovery would likely remain capped unless price can reclaim the 1.3450–1.3482 resistance area.

On the topside, immediate resistance appears at the downward-sloping trend line break near 1.3450, followed by the dense SMA cluster around 1.3482, with a subsequent barrier at the former rising support trend line at 1.3500 and a stronger structural cap at 1.3710. On the downside, the first notable support is the reclaimed resistance break zone near 1.3338, where buyers may attempt to stabilize the decline before any deeper slide unfolds.

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