British Pound slides as France fiscal shock lifts the US Dollar

• GBP/USD falls as French fiscal turmoil strengthens Dollar demand.
• US services cool, but rising prices keep inflation concerns alive.
• Hawkish BoE signals limit Sterling losses ahead of Mann speech.

The Pound Sterling dives by over 0.19% against the US Dollar at the beginning of the week, despite a dip in US services sector activity and elevated US Treasury yields. underpins the Greenback. The GBP/USD trades at 1.3218 at the time of writing.

Sterling weakens as Eurozone stress outweighs softer US services momentum

Sentiment remains upbeat, with US equities edging higher, while the buck gains traction as the Euro tumbles amid the fiscal crisis in France, widening spreads between OATs and German Bunds.

Data in the US showed that September’s ISM Services PMI slowed from 55.4 to 54.9, below estimates of 54.9, while input costs continued to rise, above forecasts. Prices paid rose from 72.6 to 74.0, exceeding the 73.3 forecast, while new orders cooled and the employment sub-component increased.

 In the meantime, tensions in the Middle East remain high as Yemeni sources clash with the Houthis as they aim to reclaim Bab al-Mandab. Recently, Yemeni Forces revealed that they’ve taken control of Al-Makah with air support, following an exchange of fire with Houthi militias.

This pushed Oil prices lower, with West Texas Intermediate (WTI), the US crude benchmark, losing almost 1%, down to $90.35. Worth noting that the positive correlation of the US Dollar with WTI pushed the Greenback lower, after the US Dollar Index (DXY) touched daily highs of 102.53.

The DXY, which measures the performance of the American currency versus six others, is at 102.25, up 0.32%.

In the UK, the S&P Global Services PMI exceeded estimates, rising to 52.1 from 51.7, but remained below August’s 52.5 print, indicating a moderate deceleration. Meanwhile, expectations that PM Andy Burnham plans to close ties with the European Union (EU), capped the drop of Sterling.

Additionally, remarks by Bank of England Governor Andrew Bailey and Deputy Governor Dave Ramsden increased the likelihood of further BoE tightening.

In the meantime, the UK economic docket is light, with traders eyeing speeches by BoE’s Catherine Mann. In the US, traders are eyeing the release of the FOMC's last meeting minutes on October 8.

GBP/USD Price Forecast: Technical Outlook

In the daily chart, GBP/USD trades at 1.3213, keeping a bearish near-term tone as spot holds well below the cluster of simple moving averages around 1.3451 and the former upward trend-line supports, now turned resistance, at 1.3556 and 1.3754. The downwards trend-line barriers at 1.3306 and 1.3429 reinforce the notion of a capped market, while the Relative Strength Index (14) near 34 remains just above oversold territory, suggesting persistent selling pressure but with downside momentum losing some intensity.

With no clearly defined nearby support levels below 1.3213 in the presented dataset, focus stays on the topside where initial resistance emerges at the broken trend-line level around 1.3306, followed by the descending trend-line at 1.3429 and the triple simple moving average band near 1.3451. Above there, the reclaimed former support lines at 1.3556 and 1.3754 form a broader resistance zone that would need to be overcome to ease the current bearish bias and open the way for a more sustained recovery.

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