The Pound Sterling (GBP) slipped nearly 0.4% on Monday, hovering around 1.3420 against the US Dollar (USD), as the Greenback staged a strong rebound. This comes even as the US faces growing risks of mass layoffs amid the ongoing partial government shutdown.
US Dollar Strength Despite Shutdown Risks
The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, climbed 0.55% to about 98.25. This gain occurred despite mounting worries over the federal government shutdown in Washington, which has now entered its sixth day.
The White House warned over the weekend that mass layoffs of federal employees could be imminent as the US Senate struggles to approve a short-term funding bill. National Economic Council Director Kevin Hassett told CNN, “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.”
Meanwhile, negotiations between Republicans and Democrats remain deadlocked. Democrats insist that any temporary funding bill must include permanent extensions of enhanced premium tax credits related to health insurance under the Affordable Care Act. Senate voting on the stopgap funding measure is scheduled for Monday, but recent statements suggest Democrats are unlikely to support it. Democratic Senator Ruben Gallego told CNN, “At this point, no,” when asked if a deal was close.
Currency Performance Snapshot
Among major currencies today, the US Dollar gained the most against the Japanese Yen, with smaller gains versus the Pound Sterling and Euro.
| Currency Pair | Change (%) |
|---|---|
| USD/JPY | +0.68% |
| USD/GBP | +0.16% |
| USD/EUR | +0.55% |
Market Focus Shifts to BoE Governor Bailey’s Speech
The Pound’s performance remains mixed as investors await the speech of Bank of England (BoE) Governor Andrew Bailey at the Global Investment Summit 2025 in Edinburgh, scheduled for 17:30 GMT.
Market participants will be closely watching for clues on whether the BoE might cut interest rates later this year. The central bank faces a challenging balancing act: inflation remains sticky, but the UK labor market shows signs of cooling.
At the August policy meeting, the BoE predicted inflation would peak around 4% in September. However, recent warnings from Deputy Governor Clare Lombardelli and Monetary Policy Committee member Catherine Mann cautioned that recent inflation shocks may not be temporary.
UK Economic Data Highlights
The latest revised UK Services PMI for September showed slower-than-expected growth in the services sector, with a reading of 50.8 — down from a preliminary 51.9 and August’s 54.2. This suggests economic momentum is softening.
Technical Outlook: Pound Faces Resistance Near 20-Day EMA
The GBP/USD pair is currently trading around 1.3440, remaining within Friday’s range. It continues to struggle to break above the 20-day Exponential Moving Average (EMA), which is near 1.3476.
The 14-day Relative Strength Index (RSI) is hovering between 40 and 60, indicating a sideways or consolidating trend.
Key levels to watch:
- Support: August 1 low at 1.3140
- Resistance: September 17 high at 1.3726
Bank of England FAQs: What You Should Know
What does the Bank of England do?
The BoE sets the UK’s monetary policy, aiming to keep inflation stable around 2%. It adjusts interest rates to influence borrowing costs and economic activity, which also impacts the value of the Pound.
How does BoE policy affect the Pound?
Higher interest rates tend to strengthen the Pound by attracting foreign investors. Lower rates usually weaken it, as cheaper borrowing encourages spending and investment but can reduce currency appeal.
What is Quantitative Easing (QE)?
QE involves the BoE creating money to buy government or corporate bonds, injecting liquidity into the financial system during economic stress. This often weakens the Pound.
What about Quantitative Tightening (QT)?
QT is the opposite, where the BoE reduces bond purchases as the economy improves, usually supporting a stronger Pound.
Summary:
Despite the US government shutdown and the looming risk of mass federal layoffs, the US Dollar has remained resilient, putting pressure on the Pound Sterling. Investors now await BoE Governor Bailey’s speech for guidance on future UK monetary policy, while UK economic data shows signs of slowing growth. The Pound’s near-term trajectory hinges on both domestic data and global developments — with technical levels suggesting cautious trading ahead.
