The British pound extended losses against the U.S. dollar on Monday, opening the week with a mild bearish tone as the greenback strengthened across global markets. The pair slipped 0.3% to trade just below the mid-1.3400s, failing to build on last week’s rebound.
The modest pullback comes after Friday’s gains were erased amid renewed dollar demand. Broader risk sentiment softened as investors digested political developments in Japan and lingering uncertainty over the U.S. government shutdown.
While downside momentum has eased, analysts say the pair remains under short-term pressure until follow-through buying emerges. Market participants are reluctant to add new positions ahead of key macro catalysts later in the week.
BoE Policy Outlook Anchors Pound
Money markets largely expect the Bank of England (BoE) to hold interest rates steady through the remainder of the year, with traders pricing in limited policy changes amid mixed economic signals. Inflation remains sticky, but recent data has pointed to a surprisingly resilient U.K. economy.
That combination could lend some medium-term support to the pound, potentially limiting further losses against the dollar. However, traders remain cautious as the market awaits fresh direction from upcoming data releases and central bank commentary.
Upcoming drivers for GBP/USD movement:
- UK Construction PMI: expected to offer clues on housing and business activity
- BoE Governor Andrew Bailey’s speech: could shape market expectations for 2025 rate decisions
- U.S. economic indicators: including labor and inflation data influencing Fed rate outlook
Bailey’s comments later Monday during the North American session will be closely monitored for any hints of policy recalibration.
Dollar Gains on Japan and Fed Sentiment
In Asia, Japan’s ruling Liberal Democratic Party (LDP) elected Sanae Takaichi as its new leader, raising expectations of a fiscally loose policy stance. Analysts believe the move could delay the Bank of Japan’s (BoJ) next rate hike, triggering broad weakness in the Japanese yen and indirectly boosting dollar strength across major pairs.
However, upside momentum for the greenback may remain capped. Markets increasingly expect the Federal Reserve to cut interest rates twice more this year, with investors wary that a prolonged U.S. government shutdown could dampen economic growth.
Overall, the GBP/USD pair remains trapped between diverging monetary policies and political headwinds. For now, traders await clearer signals before committing to a sustained direction, with the 1.3400 level serving as near-term support and 1.3480 resistance capping the upside.