British Pound Dips as US Dollar Strengthens on Safe-Haven Demand

The British pound (GBP) has weakened against the US dollar (USD), with the GBP/USD pair dropping to around 1.3200 during Monday's early European trading session. The decline is driven by a surge in the US Dollar's safe-haven appeal, fueled by growing concerns over France's fiscal situation. The US Dollar Index (DXY), which measures the Greenback's strength against six major currencies, climbed 0.42% to near 1.3200, reaching a fresh yearly high at 102.53.

The US Dollar's strength is also supported by reduced expectations of a hawkish Federal Reserve (Fed) policy at the October meeting. The CME FedWatch tool indicates an 82.3% probability that the Fed will maintain steady interest rates this month, a significant shift from the 35.8% probability observed last week. This adjustment follows the release of the United States (US) Nonfarm Payrolls (NFP) data on Friday, which revealed moderate job growth.

Technical analysis of the GBP/USD pair shows a bearish near-term bias, with the price holding below the 20-day exponential moving average (EMA) at 1.3324. The Relative Strength Index (14) at 33 suggests that while downside pressure persists, the sell-off is losing momentum. The key support level to watch is the Year-Till-Date (YTD) low at 1.3140, with a decisive move below this level potentially exposing the pair to further declines toward 1.3100 and the psychological level of 1.3000.

Investors are also anticipating the release of the US ISM Services Purchasing Managers Index (PMI) data for September, scheduled for 14:00 GMT. The ISM Services PMI is expected to rise to 55.7 from 55.4 in August, which could provide additional insights into the economic outlook and potential impacts on the US Dollar's strength.