Sterling's Dilemma: The Battle for 1.33 and the Struggle Under Rate-Cut Shadows

2025/07/30

On London traders' screens, the pound-to-dollar exchange rate clawed its way above 1.3250—a feeble rebound like fleeting calm before a storm. Under the crushing weight of the Fed's hawkish signals, sterling's every gasp seemed precious yet fragile. The 1.33 threshold stood as an invisible fortress wall, suppressing any meaningful recovery.

The currency battle's outcome now transcends technical charts. Fed Chair Powell's declaration—"September meeting not inclined toward cuts"—detonated across forex markets.

Coupled with robust U.S. ADP employment growth of 104K and Q2 GDP's dazzling 3.0% annualized surge, the dollar's fortress became impregnable. City Index analyst Derek Halpenny observed sharply: "U.S. economic resilience paired with Fed hawkishness creates an unshakable dollar advantage."

Across the Atlantic, Britain's economic skies darkened. Manufacturing PMI languished below the boom-bust line, retail sales remained feeble, and markets now price in a near-certain 25bps Bank of England cut on August 7.

Tokyo FX researcher Naoya Oshikubo pierced to the core: "Rate-cut expectations are fully priced, eroding sterling's fundamental support." This policy divergence tightened like an invisible noose around the pound's rebound potential.

Technical charts flashed ominous signals. The 100-day moving average (1.3275)—a support pillar since mid-April—crumbled, marking the first major breakdown in five months.

Repeated probes at 1.33 failed to breach the 20-day MA resistance. More alarmingly, the RSI lingered in bearish territory, confirming the bears' grip on momentum. Should 1.3220 support falter, May's 1.3135 low becomes the next target.

Tonight, the U.S. core PCE inflation report looms—a potential knockout blow for sterling. Stronger-than-expected data would arm Fed hawks with fresh ammunition, inviting renewed pound selling.

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