British Pound slides as France fiscal shock lifts the US Dollar

The British Pound (GBP) experienced a notable decline against the US Dollar (USD) at the start of the week, outperforming the US Dollar despite a slowdown in US services sector activity and a rise in US Treasury yields. As of the latest trading, the GBP/USD pair stood at 1.3218. Market sentiment remained bullish, with US equities climbing and the US Dollar gaining strength as the Euro (EUR) suffered due to the fiscal turmoil in France, resulting in wider spreads between OATs and German Bunds.

US economic indicators revealed that September's ISM Services PMI fell to 54.9, below expectations of 55, while input costs rose above forecasts. New orders decelerated, and employment activities surged. Meanwhile, tensions in the Middle East escalated with Yemeni forces clashing against the Houthis, leading to a drop in Oil prices, with WTI crude losing nearly 1% to $90.35.

The US Dollar's positive relationship with WTI oil prices contributed to its decline after the USD Index (DXY) hit daily highs of 102.53. In the UK, the S&P Global Services PMI surpassed estimates, reaching 52.1 from 51.7, but still fell short of August's 52.5, indicating a slight slowdown. The UK's light economic calendar, with a focus on BoE Governor Andrew Bailey's and Deputy Governor Dave Ramsden's remarks, saw traders awaiting the FOMC's latest meeting minutes.

The GBP/USD chart demonstrated a bearish trend, with the pair trading near the support levels of 1.3306 and 1.3429, and remaining below the cluster of simple moving averages around 1.3451. Analysts noted the RSI near 34, indicating persistent selling pressure, but with the downside momentum weakening. The technical analysis suggested that overcoming the broken trend-line level at 1.3306 and the descending trend-line at 1.3429, along with the broader resistance zone formed by the 1.3556 and 1.3754 levels, would be necessary to reverse the current downtrend and initiate a recovery.