The Bank of England's "hawkish pause" collides with the Fed's rate cut expectations, and the market focuses on non-farm payroll data
2025-09-01 18:07:16
The British pound (GBP) resumed its upward trend against the US dollar after a slight decline in the previous trading day, trading around 1.3530 during the European session on Monday (September 1st). The currency pair maintained its strength as persistent inflationary pressures in the UK reduced the likelihood of further Bank of England interest rate cuts, providing support for the pound. Last week, Bank of England Monetary Policy Committee member Catherine Mann emphasized the need to maintain current interest rates to address inflation risks.
Analysis of influencing factors
The British pound maintained its gains despite the release of secondary data from the UK. The UK National House Price Index rose 2.1% year-on-year in August, slowing from a 2.4% increase in July. Month-on-month, it fell 0.1%, compared to expectations for a 0.2% increase and the previous reading of a 0.5% rise.
Robert Gardner, chief economist at the Nationwide Building Society, noted that house price growth remained weak because the house price-to-income ratio remained high, making home buying tight, and mortgage costs were more than three times pre-pandemic levels.
British Chancellor of the Exchequer Rachel Reeves may raise revenue by imposing a windfall tax on commercial banks to recoup the profits they extract from taxpayers through deposits with the Bank of England, Bloomberg reported last Friday.
The pound's strength also benefited from a weaker dollar as market expectations for a September rate cut by the Federal Reserve continued to rise. According to the CME FedWatch tool, traders now see a greater than 87% probability of a 25 basis point rate cut at the Fed's September policy meeting, up from 84% a week ago.
Traders are closely watching a slew of U.S. labor market data due this week that could influence the Federal Reserve's September policy decision. Key reports include the ADP employment change for August, average hourly earnings and non-farm payrolls.
Technical Analysis
Technical analysis on the 4-hour chart shows that the GBP/USD pair is in a consolidation pattern in the short term, with a breakthrough yet to be confirmed. The exchange rate is attempting to build a short-term bottom structure.
On the upside, the exchange rate held above the 1.3500 support and successfully broke through the resistance level of the August 22 high (1.3543). If so, the next target will be directly at the 1.3600 round number mark, which may open up greater upside space after breaking through.
On the downside, the pair fell below the psychological level of 1.3500. A subsequent loss of the key support zone of 1.3450-1.3460 would restart the downward trend and lead to the next major support level of 1.3400 area.
(GBP/USD 4-hour chart, source: Yihuitong)
At 18:02 Beijing time, the pound sterling was trading at 1.3528/29 against the US dollar.
Analysis of influencing factors
The British pound maintained its gains despite the release of secondary data from the UK. The UK National House Price Index rose 2.1% year-on-year in August, slowing from a 2.4% increase in July. Month-on-month, it fell 0.1%, compared to expectations for a 0.2% increase and the previous reading of a 0.5% rise.
Robert Gardner, chief economist at the Nationwide Building Society, noted that house price growth remained weak because the house price-to-income ratio remained high, making home buying tight, and mortgage costs were more than three times pre-pandemic levels.
British Chancellor of the Exchequer Rachel Reeves may raise revenue by imposing a windfall tax on commercial banks to recoup the profits they extract from taxpayers through deposits with the Bank of England, Bloomberg reported last Friday.
The pound's strength also benefited from a weaker dollar as market expectations for a September rate cut by the Federal Reserve continued to rise. According to the CME FedWatch tool, traders now see a greater than 87% probability of a 25 basis point rate cut at the Fed's September policy meeting, up from 84% a week ago.
Traders are closely watching a slew of U.S. labor market data due this week that could influence the Federal Reserve's September policy decision. Key reports include the ADP employment change for August, average hourly earnings and non-farm payrolls.
Technical Analysis
Technical analysis on the 4-hour chart shows that the GBP/USD pair is in a consolidation pattern in the short term, with a breakthrough yet to be confirmed. The exchange rate is attempting to build a short-term bottom structure.
On the upside, the exchange rate held above the 1.3500 support and successfully broke through the resistance level of the August 22 high (1.3543). If so, the next target will be directly at the 1.3600 round number mark, which may open up greater upside space after breaking through.
On the downside, the pair fell below the psychological level of 1.3500. A subsequent loss of the key support zone of 1.3450-1.3460 would restart the downward trend and lead to the next major support level of 1.3400 area.
(GBP/USD 4-hour chart, source: Yihuitong)
At 18:02 Beijing time, the pound sterling was trading at 1.3528/29 against the US dollar.
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