The Pound Sterling is stable at around 1.3450 against the US Dollar, supported by expectations that the Federal Reserve will cut interest rates. The CME FedWatch tool shows that nearly everyone expects a 25-basis point rate cut by the Fed in September, likely bringing borrowing rates down to 4.00%-4.25%. US President Donald Trump has nominated Stephen Miran for Fed Governor, which could encourage more rate cuts. Additionally, Bloomberg reports that Fed Governor Christopher Waller could be a candidate to succeed Jerome Powell after discussions with Trump’s team.

The Pound Sterling Holds Steady

The Pound Sterling has maintained its gains from Thursday, following the Bank of England’s decision to cut rates by 25 basis points to 4% after a close vote. The market anticipates a total cut of 17 basis points for the year, determined by a narrow 5-4 majority. The Bank of England (BoE) is taking a “gradual and careful” approach to easing monetary policy, aiming to bring inflation down to the 2% target. BoE Governor Andrew Bailey highlighted inflation risks and a weak growth outlook, with future CPI projections raised to 2.7%. Upcoming events to watch include UK labor market data and US CPI data, which is expected to show US inflation rising to 2.8%. Technical analysis of the Pound Sterling suggests a bullish outlook, with upward movement above the 20-day EMA, along with noted support and resistance levels. As of today, August 8th, 2025, the Pound continues to hold steady against the Dollar, trading near 1.3450. This stability follows the Bank of England’s recent rate cut to 4%, and the market is fully pricing in a similar cut from the US Federal Reserve next month. The immediate focus is on which central bank will ease policy more aggressively.

Fed Rate Cut Expectations

Expectations for a Fed rate cut in September are nearly unanimous, which would likely weaken the US Dollar. This view gained traction after the July 2025 Non-Farm Payrolls report showed job growth slowing to just 150,000, significantly below expectations and indicating a cooling US economy. The potential nomination of more dovish members to the Fed’s board adds to this perspective. In contrast, the Bank of England’s recent cut was a close decision, made by a narrow 5-4 vote. This caution reflects the challenges of combating high inflation observed in 2023, making the bank cautious about lowering rates too quickly, particularly since its own inflation forecast for the year has risen to 2.7%. This division suggests that future UK rate cuts are less certain than those in the US. Next week’s US Consumer Price Index (CPI) data will be crucial in testing this view, with expectations of inflation rising to 2.8%. Over the past year, a CPI surprise of just 0.2% above predictions has often led to significant movements in the dollar index on the day of the release. A stronger inflation figure could quickly shift expectations for a September Fed cut. With this context, traders might consider using options to manage risk while positioning for a higher GBP/USD. For example, buying call options on this currency pair could provide profits if the pound’s value increases as a result of a Fed signal for a cut. This strategy also limits risk if the US inflation data unexpectedly strengthens the dollar. From a technical point of view, the current price action above the 20-day Exponential Moving Average lends support to a bullish outlook for the pair. We will monitor whether it can break the recent resistance around 1.3520, which could indicate further upward momentum. However, failing to breach this level, especially after the US CPI release, might signal a short-term peak. Create your live VT Markets account and start trading now.

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