British Pound Drops as French Fiscal Crisis Boosts US Dollar Demand

The British Pound (GBP) dropped by over 0.19% against the US Dollar (USD) at the start of the week, despite a slowdown in US services activity and rising Treasury yields. The decline was driven by fiscal turmoil in France, which strengthened demand for the Dollar. At the time of writing, GBP/USD was trading at 1.3218.

Data from the US showed that the ISM Services PMI for September slowed to 54.9 from 55.4, below expectations, while input costs continued to rise. The Prices Paid index increased to 74.0 from 72.6, exceeding forecasts. Meanwhile, tensions in the Middle East pushed oil prices lower, with West Texas Intermediate (WTI) crude losing almost 1%, dropping to $90.35.

In the UK, the S&P Global Services PMI exceeded estimates, rising to 52.1 from 51.7, but remained below August’s 52.5 print. Expectations of closer ties between the UK and the European Union (EU) under PM Andy Burnham limited further declines in the Pound. Additionally, hawkish remarks from Bank of England Governor Andrew Bailey and Deputy Governor Dave Ramsden increased the likelihood of further BoE tightening.

Technical analysis of GBP/USD shows a bearish near-term tone, with the pair trading well below key moving averages and resistance levels. The Relative Strength Index (14) near 34 suggests persistent selling pressure but with downside momentum losing some intensity. Focus remains on the topside resistance levels, with initial barriers at 1.3306 and 1.3429.