• The GBP/USD outlook suggests mounting worries about the UK’s fiscal health.
• The UK public sector borrowed 83.8 billion pounds between April and August.
• The Bank of England kept interest rates on hold in the previous session.

The GBP/USD outlook suggests mounting worries about the UK’s fiscal health after data revealed a bigger-than-expected surge in public borrowing. Meanwhile, the dollar continued its recovery after the Fed cut rates as expected and said it would keep assessing inflation risks.

Data on Friday revealed that the UK public sector borrowed 83.8 billion pounds between April and August. The figure beat forecasts by 11.4 billion and raised concerns about a growing debt burden. It also puts additional pressure on Finance Minister Rachel Reeves to create a budget that appeases investors.

“The pound has sunk on this data, and is testing support at $1.35. It is the second-worst performing currency in the G10 FX space today,” XTB research director Kathleen Brooks said.

Meanwhile, the Bank of England kept interest rates on hold in the previous session. The central bank is facing a difficult challenge of balancing growth and inflation, which remains too high.

On the other hand, the Fed lowered borrowing costs on Wednesday as expected, but maintained that it would keep assessing inflation risks. As a result, the dollar has recovered from its lows, further weighing on the pound.
 

GBP/USD key events today

Market participants do not expect any high-impact economic releases from the UK or the US. Therefore, they will keep digesting key policy decisions.
 

GBP/USD technical outlook: Bears take charge below 30-SMA
 

(Click on image to enlarge)

GBP/USD 4-hour chart
 

On the technical side, the GBP/USD price trades well below the 30-SMA with the RSI on the verge of dipping into the oversold region. The bearish bias strengthened after the price broke below the 30-SMA and the 1.3575 key support level. However, bears must confirm the new trend by respecting the 30-SMA as resistance.

The previous bullish trend had developed well, respecting the 30-SMA as support and making higher highs and lows. However, this changed when the price briefly punctured the 1.3701 resistance and was rejected. The large top wick was a sign that bears had gained momentum. They confirmed this by pushing below the 30-SMA.

If the new downtrend continues, GBP/USD will get a chance to retest the 1.3350 support level. A break below this level would solidify the bearish bias.

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