British Pound cracks as US growth burst sends US Dollar higher

• US PMIs surge, pushing the US Dollar Index above 101.00 barrier.
• Barr backs more tightening as October hike odds jump.
• Slower UK activity leaves Sterling exposed to widening policy gap.

The Pound Sterling tanks over 0.70% against the Greenback on Wednesday as US economic data showed business activity is picking up, while fears of a US diesel export ban pushed crude prices higher. The GBP/USD trades at 1.3253 after peaking at 1.3347.

GBP/USD tumbles as booming US PMIs and Fed hawks lift Dollar

The rise in Oil prices, which are denominated in US Dollars, is boosting the Greenback. The US Dollar Index (DXY), which tracks the performance of the buck against six currencies, is up 0.52% above the 101.00 barrier for the first time since July 30.

S&P Global revealed that the Flash Manufacturing PMI in September crushed estimates of 53.5 and the prior month’s reading of 53.9, coming at 57. At the same time, the Services PMI expanded from 56.5 to 58.2, also exceeding forecasts, and the Composite PMI climbed from 56 to 58.4.

Chris Williamson, chief business economist at S&P Global Market Intelligence, wrote:” Business is clearly booming now in both manufacturing and services,” and added that “growth s being accompanied by some of the most severe supply chain bottlenecks seen in the near-two-decade survey history if the pandemic is excluded, with companies also reporting increasing problems finding suitable staff.”

Alongside strong US data, Fed Governor Michael Barr said additional rate hikes are likely needed to ensure a timely return to the 2% inflation target, adding his name to the list of known hawks on the FOMC. He added, “In my view, given changes to the economy, we were out of position, and we made an adjustment in the right direction.”

After Barr’s remarks, money markets expect US interest rates to aim higher. Odds for a Fed rate hike in the October meeting are at 70%, up from 52% a day ago, according to Prime Terminal.

In the UK, S&P Global's business activity index showed that manufacturing and services activity continued to expand but slowed in September compared with the previous month.

Ahead this week, the UK economic docket will feature speeches by Bank of England (BoE) officials and the GfK Consumer Confidence for September. In the US, traders eye speeches by Fed’s Beth Hammack and Anna Paulson, along with jobless claims data.

GBP/USD Price Forecast: Technical Outlook

In the daily chart, GBP/USD trades around 1.3255, extending a bearish phase after slipping beneath all major structural levels. The pair sits under the cluster of the 50-, 100- and 200-day Simple Moving Averages (SMAs) grouped near 1.3476, keeping the broader tone capped despite the Relative Strength Index (RSI) at 26 suggesting oversold conditions. The presence of multiple broken upward trend lines now acting as overhead barriers reinforces the idea that any recovery would face selling pressure before the pair can stabilize.

On the topside, immediate resistance emerges at the earlier downward resistance trend-line break near 1.3333, followed by the former rising trend support around 1.3360 and the later trend-line break at 1.3447. Above these, the dense SMA cluster around 1.3476 and the prior break zone near 1.3508 form a broader cap, with a more distant resistance reference at the recent resisted close of 1.3544. On the downside, clean structural support is not evident in the current dataset, leaving the pair vulnerable to further declines while below these overhead levels and suggesting that any bounce would likely be corrective within a still bearish daily backdrop.

(The technical analysis of this story was written with the help of an AI tool. Know more.)