British Pound drifts higher to near 1.3550 on UK fiscal discipline pledges

The GBP/USD pair gains ground to near 1.3545 during the Asian trading hours on Tuesday. The British Pound (GBP) edges higher against the US Dollar (USD) after UK Chancellor John Healey unveiled a series of measures designed to encourage economic growth and draw more private investment into the UK.

Healey promised to cut regulatory barriers to UK investment and create new testing freedoms for emerging technologies, per the BBC. Additionally, the UK Chancellor on Monday announced plans to give city regions greater powers to attract private investment as part of Prime Minister Andy Burnham's plan to devolve power away from central government.

Healey also stressed his commitment to fiscal discipline and to curbing rising costs for business and the public, including a 25% reduction in regulatory costs by the next election due in 2029. The Cable receives some support following Healey's first major speech ahead of the upcoming October budget.

A stronger-than-expected US jobs report in August has pushed Federal Reserve (Fed) rate-hike bets to above 60%. The US Nonfarm Payrolls (NFP) added 162,000 jobs in August, beating expectations, while the Unemployment Rate held steady during the same period, the US Bureau of Labor Statistics (BLS) showed on Friday. Attention will shift to the US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation readings later this week. 

UK data seen as unlikely to shift BoE despite fragile growth backdrop

Strategists at Brown Brothers Harriman note that the upcoming UK July GDP release, due on Friday, is “unlikely to shift the dial on Bank of England (BoE) rate expectations.” They point out that “real GDP is expected at 0.0% m/m vs. +0.3% in June, as July’s decline in retail sales volumes offset an improvement in the compositive PMI,” while “the BoE’s baseline Q3 forecast is 0.1% q/q.” In their view, the broader macro backdrop argues against the degree of tightening currently priced, as “the UK’s negative output gap, a policy rate above the mid-point of the BoE’s 2% to 4% neutral range estimate and the prospect of tighter fiscal policy all argue for a less aggressive hiking cycle.”

Technical Analysis: GBP/USD maintains a positive tone in the near term

In the daily chart, GBP/USD holds above the lower Bollinger Band and the 100-day moving average (MA), keeping the short-term bias mildly bullish despite price slipping just under the 20-day Bollinger simple moving average (SMA). The Relative Strength Index (RSI) around 53 sits close to neutral territory, suggesting a consolidative tone rather than a stretched move as spot hovers between underlying trend support and the upper side of the recent volatility envelope.

On the downside, initial support emerges at the lower Bollinger Band near 1.3455, with the 100-day MA at 1.3445 reinforcing this demand area; a daily close below this cluster would weaken the constructive bias and open the door to a deeper pullback. On the topside, immediate resistance is seen at the 20-day Bollinger SMA around 1.3560, with the upper Bollinger Band near 1.3660 acting as the next hurdle; a break above these caps would suggest renewed upside momentum towards the recent highs.