Pound Sterling underperforms US Dollar despite US government shutdown
- The Pound Sterling slides to near 1.3420 against the US Dollar as the Greenback rebounds strongly.
- The US Dollar gains even as Washington faces mass lay-offs risks amid the government shutdown.
- Investors await speech from BoE Governor Bailey at 17:30 GMT.
The Pound Sterling (GBP) trades 0.4% lower to near 1.3420 against the US Dollar (USD) during the European trading session on Monday. The GBP/USD pair faces selling pressure as the US Dollar rebounds strongly despite growing risks that the White House would be forced to make mass lay-offs in the wake of a partial United States (US) government shutdown.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, gains 0.55% to near 98.25.
Over the weekend, the White House signaled that mass lay-offs of federal workers are around the corner as the short-term funding bill is unlikely to be passed by the US Senate in the voting on Monday. “US President Donald Trump and White House budget director Russ Vought are lining things up and getting ready to act if they have to, but hoping that they don’t," National Economic Council Director Kevin Hassett told at CNN’s "State of the Union" program.
Republicans struggle to force Democrats to support the stopgap bill as the latter are demanding that the White House to make a permanent extension of enhanced premium tax credits to help Americans purchase private health insurance through the Affordable Care Act and ensure that it will not try to unilaterally cancel spending agreed to in any deal, Reuters reported.
Meanwhile, US Senators are scheduled to meet again on Monday to vote on the stopgap bill. Recent comments from Democrats have signaled that they are unlikely to vote in favour of supporting the short-term funding bill. Democratic Senator Ruben Gallego told CNN, "At this point, no," after he was asked whether lawmakers are close to reaching a deal.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.55% | 0.16% | 0.68% | 0.00% | -0.10% | 0.12% | 0.36% | |
| EUR | -0.55% | -0.49% | 0.04% | -0.57% | -0.68% | -0.45% | -0.22% | |
| GBP | -0.16% | 0.49% | 0.63% | -0.08% | -0.19% | 0.04% | 0.28% | |
| JPY | -0.68% | -0.04% | -0.63% | -0.62% | -0.83% | -0.62% | -0.36% | |
| CAD | -0.01% | 0.57% | 0.08% | 0.62% | -0.07% | 0.12% | 0.36% | |
| AUD | 0.10% | 0.68% | 0.19% | 0.83% | 0.07% | 0.23% | 0.47% | |
| NZD | -0.12% | 0.45% | -0.04% | 0.62% | -0.12% | -0.23% | 0.24% | |
| CHF | -0.36% | 0.22% | -0.28% | 0.36% | -0.36% | -0.47% | -0.24% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Daily Digest Market Movers: Investors await BoE Bailey's speech
- The Pound Sterling exhibits a mixed performance against its major peers at the start of the week, with investors awaiting the speech from Bank of England (BoE) Governor Andrew Bailey at Scotland's Global Investment Summit 2025 in Edinburgh, Scotland.
- Investors will pay close attention to BoE Bailey’s words to get cues about whether the United Kingdom (UK) central bank will cut interest rates in the remainder of the year. Financial market participants expect the BoE to perform a delicate balancing act in upcoming policy meetings amid sticky inflationary pressures and cooling labour market conditions.
- At the August policy meeting, the BoE stated that inflation would peak around 4% in September. However, Deputy Governor Clare Lombardelli and Monetary Policy Committee (MPC) member Catherine Mann warned last week that recent inflation shocks should not be considered as temporary.
- Bank of England’s (BoE) Decision Maker Panel (DMP) survey showed on Wednesday that one-year forward CPI inflation expectations by the UK firms edged slightly higher to 3.5% in the quarter ending September.
- On the economic data front, the revised UK S&P Global PMI report for September showed that activities in the services sector grew at a slower pace than had been anticipated earlier. The Services PMI came in at 50.8, lower than the preliminary reading of 51.9. In August, the Services PMI recorded at 54.2.
Technical Analysis: Pound Sterling continues to face pressure near 20-day EMA
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The Pound Sterling trades inside Friday’s trading range around 1.3440 against the US Dollar at the present time. The GBP/USD pair struggles to return above the 20-day Exponential Moving Average (EMA), which trades around 1.3476.
The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating a sideways trend.
Looking down, the August 1 low of 1.3140 will act as a key support zone. On the upside, the September 17 high of 1.3726 will act as a key barrier.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
