British Pound gains capped as fiscal, geopolitical risks persist

The British Pound (GBP) gained against the US Dollar (USD) on Thursday, trading around 1.3500 during European hours. This upward movement was fueled by a sharp rise in the Japanese Yen (JPY), attributed to speculation of potential direct intervention by Japanese authorities in foreign exchange markets. However, the Greenback faced additional challenges due to a slowdown in US private-sector employment for August, with ADP figures showing a smaller-than-expected 38,000 new positions compared to the anticipated 47,000.

Despite these cooling labor signals, markets still anticipated a two-thirds probability of a Federal Reserve interest rate hike later in the month. The GBP remained restrained as it had to navigate its own set of headwinds, including heightened global risk aversion caused by Middle East energy market shocks and domestic concerns over Prime Minister Andy Burnham's stress on fiscal discipline and early budget timelines.

The pair held steady above the 50-day Exponential Moving Average (EMA) and was capped by the nine-day EMA, indicating a range-bound short-term configuration. Technical indicators suggested neutral momentum with an RSI near 47 following its pullback from overbought readings. While the 14-day Relative Strength Index (RSI) remained neutral, the FXS Fed Sentiment Index suggested softer external support for sustained bullish momentum.

Resistance lay at the nine-day EMA at 1.3539, with a potential daily close above this level opening the path for a retest of recent highs. On the downside, immediate support was provided by the 50-day EMA at 1.3481, and a break beneath this support would likely shift the bias towards a deeper corrective move towards lower levels.