The Pound Sterling (GBP) is moving largely sideways against the US Dollar (USD) on Tuesday as traders assess mixed US economic signals alongside shifting expectations for Federal Reserve (Fed) and Bank of England (BoE) policy. GBP/USD trades near 1.3540, down around 0.06% on the day.
US manufacturing activity softened in August, with the ISM Manufacturing PMI declining to 54.6 from 55.6 in July and falling short of the 55.2 market forecast. The Institute for Supply Management noted slower new-order growth, while elevated input costs continued to highlight persistent inflationary pressure.
Meanwhile, the July Job Openings and Labor Turnover Survey (JOLTS) showed vacancies rising to 7.217 million, although the figure remained below the 7.3 million consensus estimate. Despite signs of moderation in hiring conditions, the US labor market remains relatively resilient, supporting the possibility that the Fed could maintain a restrictive policy stance.
Fed Chair Kevin Warsh recently indicated that policymakers still have further work to do on restoring price stability, reinforcing a hawkish tone as inflation remains above the central bank’s 2% objective.
Sterling faces its own policy uncertainty. UK retail prices increased at their fastest pace since 2024, according to BRC data, with energy, commodity and input costs contributing to the rise. Meanwhile, British manufacturing growth slowed to its weakest pace since March.
BoE MPC member Catherine Mann argued that interest rates should remain somewhat restrictive before being adjusted if necessary. She also pointed to stronger economic activity between the latest policy meetings. Markets currently price an 82% probability of a BoE rate increase by the end of 2026.
Investors will also monitor the UK Parliament’s return this week for indications of how Prime Minister Andy Burnham intends to finance his policy agenda ahead of the October budget.
US markets now await additional labor indicators, the ISM Services PMI and Friday’s Nonfarm Payrolls report, which could provide fresh direction for GBP/USD.
Trade idea: GBP/USD remains range-bound; a move above 1.3570 could target 1.3620, while a break below 1.3500 may expose support around 1.3450.