British Pound extends losses as US Dollar holds ground on Fed rate hike bets

The British Pound (GBP) continued to experience losses on Thursday, trading around 1.3590 against the US Dollar (USD). This decline occurred as the USD maintained its strength following the release of robust economic data on Wednesday. Specifically, July's Personal Consumption Expenditures (PCE) price index increased by 0.2% month-over-month, surpassing expectations of a 0.1% rise, while the annual rate remained at 3.7%, outpacing the forecasted 3.6%.

These figures have strengthened expectations that the Federal Reserve may implement one final rate hike before the end of the year, prompting investors to closely monitor Federal Reserve Chair Kevin Warsh's upcoming speech at the Jackson Hole symposium. Additionally, crude oil prices continued their downward trend due to diplomatic progress in the Middle East, which addressed concerns over the Strait of Hormuz, alleviating immediate inflation worries.

However, heightened scrutiny of the US Treasury's plan to double bond buybacks, criticized by billionaire investor Stanley Druckenmiller as detrimental to market credibility and an inadequate solution for debt reform, has negatively impacted investor sentiment. Scotiabank analysts noted that the Pound Sterling has received limited fundamental news recently, with attention centered on disappointing second-tier Construction & Building Index (CBI) business sentiment data and a shift in the policy outlook.

This has weakened fundamental support, leaving the currency more susceptible to downside risks in the near term. Currently, GBP/USD is trading at 1.3590, maintaining a slight bullish bias as it holds above the 50-day Exponential Moving Average (EMA) but struggles to break the nine-day EMA. The 14-day Relative Strength Index (RSI) stands at approximately 60, indicating constructive momentum without signaling overbought conditions.

If the pair manages to break above the nine-day EMA, it could open the way for further bullish momentum. Conversely, repeated failures to surpass this level might suggest consolidation or a minor pullback towards the broader moving-average base.