Sterling Slides to 1.3387 as Fed Hike Lifts Dollar

The GBP/USD exchange rate slipped to 1.3387 on Monday as the pound remained under pressure. This decline reflects the lingering impact of recent central bank policy decisions in both London and Washington.

Sterling lacked a fresh catalyst for upward movement during the session. The absence of major UK economic data left the currency without a clear directional driver. Market participants waited for new signals from fiscal and monetary authorities.

Fed Decision Strengthens Dollar

The US dollar gained initial support following the Federal Reserve's unanimous rate hike. This was the first such move since 2023 and altered market expectations. Traders now anticipate further increases in interest rates from the central bank.

However, the greenback struggled to extend its gains during the European session. Improved risk appetite among investors reduced demand for safe-haven assets. The dollar’s early strength faded as global equity markets stabilized.

Boe Policy Adds Pressure

The Bank of England kept interest rates unchanged last week. The central bank also slowed the pace of its bond sales program. This combined decision added to the downward pressure on the pound.

Currency traders view the Boe’s cautious approach as a signal of caution. The move limits the pound’s potential for appreciation against the dollar. This dynamic reinforces the subdued trading range observed on Monday.

Borrowing Data Tests Sterling

UK borrowing figures are set to be released on Tuesday. Higher government debt could weigh on the pound ahead of the Autumn Budget. Markets will reassess the state of public finances based on these numbers.

The CBI will also publish industrial trends orders on the same day. A marked deterioration in this data could further harm Sterling. Meanwhile, Federal Reserve speakers Williams and Jefferson will provide clues on the US monetary outlook. Their comments may influence the dollar’s trajectory. Source: CurrencyNews.co.uk.