GBP/USD Under Pressure as BoE and Fed Diverge

The pound sterling weakened again against the US dollar during Tuesday's trading (September 15), pushing GBP/USD close to a five-week low around 1.3465. Sterling recorded a decline for the second consecutive day as mixed UK labor market data failed to offset dollar strength.

The UK unemployment rate, based on ILO standards, held steady at 4.9% for the three months to July—better than market forecasts, which had predicted a rise to 5%. However, the number of unemployment benefit claims rose by 27,800, far exceeding the expected increase of 8,300 and reversing the previous month's decline of 11,800.

Markets are now turning their attention to the Bank of England (BoE) meeting on Thursday. The BoE is widely expected to keep interest rates unchanged, unless UK inflation data on Wednesday shows a much higher-than-expected rise. Investors will also closely watch the number of policymakers supporting a rate hike to gauge the likelihood of monetary tightening before year-end.

Conversely, the Federal Reserve is expected to raise interest rates this week. This divergence in policy expectations favors the dollar and acts as a primary source of pressure on GBP/USD. Sterling may remain vulnerable as long as the market views the Fed as more hawkish than the BoE.

The Bank of England is also reportedly considering adjustments to its bond-selling program by halting sales of 20-year and 30-year bonds. This move aims to alleviate pressure on UK borrowing costs amidst global bond market volatility.

GBP/USD continues to face a bearish bias due to a combination of unconvincing labor market data and the policy divergence between the BoE and the Fed. The 1.3465 area is a key level to watch; if the Fed signals a hawkish stance while the BoE holds rates steady, pressure on sterling could persist.