Pound Edges Higher on UK Fiscal and Regulatory Reforms

Key Moments

UK Policy Announcements Support Pound

GBP/USD is trading near 1.3545 in early Asian dealings on Tuesday, with the British Pound gaining modestly against the US Dollar. The move comes after UK Chancellor John Healey introduced a package of measures aimed at bolstering economic activity and attracting greater levels of private capital into the UK.

According to the BBC, Healey pledged to lower regulatory hurdles for domestic investment and to introduce new testing flexibilities for emerging technologies. On Monday, he also detailed plans to hand more authority to city regions to help them draw in private funding, as part of Prime Minister Andy Burnham’s broader strategy to decentralize power from the central government.

Healey emphasized his focus on fiscal prudence and on containing rising costs faced by businesses and households. This includes a goal of cutting regulatory costs by 25% before the next general election, which is scheduled for 2029. The Chancellor’s first major speech ahead of the October budget has provided some backing for the Pound, helping to underpin the Cable.

US Data Fuels Fed Rate-Hike Expectations

On the US side, a stronger-than-anticipated August labor market report has increased expectations that the Federal Reserve could raise interest rates in September, with rate-hike odds moving above 60%. Data from the US Bureau of Labor Statistics on Friday showed that Nonfarm Payrolls rose by 162,000 in August, surpassing forecasts, while the Unemployment Rate remained unchanged in the same period.

With the jobs data now absorbed, market participants are turning their attention to upcoming US inflation indicators, specifically the Producer Price Index (PPI) and Consumer Price Index (CPI), which are due later this week and could influence the Fed’s policy outlook.

UK Growth Data Seen as Unlikely to Shift BoE Outlook

Strategists at Brown Brothers Harriman argue that the imminent release of UK July GDP on Friday is “unlikely to shift the dial on Bank of England (BoE) rate expectations.” They highlight that “real GDP is expected at 0.0% m/m vs. +0.3% in June, as July’s decline in retail sales volumes offset an improvement in the compositive PMI,” while “the BoE’s baseline Q3 forecast is 0.1% q/q.”

In their assessment, the wider macroeconomic setting does not justify the current degree of tightening embedded in market pricing. They note that “the UK’s negative output gap, a policy rate above the mid-point of the BoE’s 2% to 4% neutral range estimate and the prospect of tighter fiscal policy all argue for a less aggressive hiking cycle.”

Technical Picture: Cable Retains Mildly Bullish Bias

From a technical perspective, GBP/USD maintains a constructive short-term profile on the daily chart. The pair is trading above both the lower Bollinger Band and the 100-day moving average, keeping the near-term tone mildly positive even as it trades just below the 20-day Bollinger simple moving average.

The Relative Strength Index (RSI) is around 53, close to neutral, indicating consolidation rather than an overextended move as spot holds between underlying trend support and the upper boundary of the recent volatility range.

On the downside, first support sits at the lower Bollinger Band near 1.3455, reinforced by the 100-day moving average at 1.3445. A daily close below this confluence would undermine the current constructive outlook and raise the risk of a deeper correction. On the upside, initial resistance is located at the 20-day Bollinger SMA around 1.3560, followed by the upper Bollinger Band near 1.3660. A break above these levels would indicate strengthening bullish momentum and open the path toward recent peaks.