Having rallied substantially from lows made last week, the GBP/USD broke a four-day winning streak in yesterday’s trading, falling by 0.28%.
Today, and at the London open, GBP/USD currently trades at ~1.34521, up 0.10%.
GBP/USD: Key takeaways 03/10/2025
- The most significant catalyst of GBP/USD movement currently, the US government shutdown is weighing heavily on the dollar, as markets readjust confidence in American governance
- Otherwise, and following Wednesday’s worse-than-expected UK manufacturing PMIs, signifying five-month lows, the Bank of England is under increasing pressure to consider further rate cuts, although inflation remains somewhat sticky
- Recent GBP/USD upside is almost exclusively due to dollar weakness, as opposed to pound strength
Dollar Strength Index (DXY) vs. British Strength Index (BXY). TVC, TradingView, 02/10/2025
GBP/USD: US government shutdown adds to cable upside
In a return to a word oh-so-familiar in this year’s trading, the latest wave of market uncertainty has come by way of the US government shutdown, announced on Tuesday evening, as the US Senate failed to reach an agreement on government funding.
@realDonaldTrump, Truth Social, 02/10/2025
With the majority of US Democrats voting against a funding bill proposed by the Republican Party, the shutdown is the first in almost seven years, the last having occurred during Trump’s first presidency in 2018.
While at first glance, the notion of a governmental shutdown seems purely political, some knock-on effects are already being felt within currency markets, with the release of many key economic indicators expected to be delayed, since reporting agencies are considered ‘non-essential’ during times of government shutdown.
This is especially relevant considering that, under normal market conditions, nonfarm payrolls were scheduled to be released this week.
Considering the importance of these figures, especially their implications for upcoming monetary policy, the market understandably remains somewhat uneasy, which has introduced some short-term dollar weakness.
Should a resolution to the shutdown be found, either by a temporary bill or a Democrat concession in accepting the most recent Republican suggestion, we can expect dollar weakness to reverse course, at least in the short term.
GBP/USD: UK manufacturing PMIs fall short of market expectations
To touch quickly on recent data, Wednesday’s report revealed that manufacturing conditions in the UK not only continue to worsen but have fallen to five-month lows, at 46.2.
At least in part, these conditions are adding pressure to the Bank of England to consider further rate cuts, although this will prove difficult if inflation remains sticky.
As such, and considering not only a non-flattering reflection of the UK economy, but also implications for Bank of England monetary policy, we can expect some short-term pound downside as seen in yesterday’s session.
GBP/USD: Technical Analysis 03/10/2025
GBP/USD: Daily (D1) chart analysis
GBP/USD, D1, OANDA, TradingView, 03/10/2025
While cable performance in the first half of 2025 was remarkable, mainly owing to a downbeat dollar, since June, the tune has somewhat changed.
Of late, we’ve entered into a period of consolidation, best visible on the daily timeframe, with price moving sideways and yet to challenge the highs of 1.37710 made earlier this year.
Currently, price trades close to the trendline, with some short-term downside on the table unless the trendline can be broken.
Should this happen, here are some key levels to be watching:
- Price target 1 (T1): 78.6% Fib: $1.33887
- Price target 2 (T2): 61.8% Fib: $1.33498
- Price target 3 (T3): 50% Fib: $1.3322
- Resistance 1 (R1): $1.35745
- Resistance 2 (R2): $1.36550
It should be considered, however, that while some downside is possible in the immediate, price remains in a sideways channel, with longer-term direction unclear.
Until the fundamental analysis picture becomes clearer, traders are advised to approach with at least some caution.
