• The Pound Sterling rises to near 1.3470 against the US Dollar amid trade tensions between the US and China.
• BoE policymaker Catherine Mann argues against further reduction in interest rates.
• Traders raise bets supporting more than 50 bps rate cuts by the Fed in the remaining year.

The Pound Sterling (GBP) extends its winning streak against the US Dollar (USD) for the third trading day on Friday. The GBP/USD pair jumps to near 1.3470 during the European session as the US Dollar underperforms its peers due to trade frictions between the United States (US) and China, and accelerating Federal Reserve (Fed) dovish expectations on monetary policy for the remaining year.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades near the 10-day low around 98.10.

Trade relations between the two largest powerhouses of the world are going through a rough patch as Washington has imposed additional 100% tariffs on imports from China against Beijing’s export controls on rare earth minerals.

Meanwhile, the meeting between US President Donald Trump and Chinese leader Xi Jinping scheduled later this month in South Korea remains on track. "We are working on a meeting, President Trump will go on meeting with Xi," US Treasury Secretary Scott Bessent said on Thursday. He added that Washington doesn’t want to “decouple with China”, but it cannot allow “bureaucrats in China to manage the supply chain, and manufacturing process for the rest of the world”.

Other leaders across the globe have also criticized China for adopting rare earths export control measures. “China’s decision on rare earths is wrong, and dangerous for world economy. I welcome a greater Group of Seven (G7) focus on where we get critical minerals from,” United Kingdom (UK) Chancellor of the Exchequer Rachel Reeves said on Thursday.
 

Daily digest market movers: Pound Sterling exhibits mixed performance against its currency peers

• The Pound Sterling demonstrates a mixed performance against its major currency peers on Friday, with investors seeking fresh cues on whether the Bank of England (BoE) will cut interest rates again in the remaining year.
• BoE dovish expectations accelerated this week after the release of the UK labor market data for the three months ending in August. The data signaled that the jobless rate accelerated and the wage growth slowed down. The Unemployment Rate accelerated to 4.8%, the highest level seen since the three-month period ending in March 2021.
• According to money market consensus, traders expect the BoE to cut interest rates by 46 basis points (bps) this year.
• On the contrary, BoE Monetary Policy Committee (MPC) member Catherine Mann, an outspoken hawk, has argued against lowering interest rates further. Mann didn’t support further monetary expansion, citing that UK labor market conditions are weakening only at a moderate pace. “What has transpired is that the labour market has modestly loosened, but it is not falling off the cliff,” Mann said in an event in Washington on Thursday, Reuters reported.
• On the fiscal front, UK Chancellor of the Exchequer Reeves confirmed that the government is not going to increase the wealth tax in the upcoming Autumn Budget scheduled next week. However, she clarified that there would be further tax raises and cuts in public spending.
• In the US, the speculation for more than 50 basis points (bps) reduction in interest rates by the Federal Reserve (Fed) has intensified amid growing US labor market concerns. According to the CME FedWatch tool, traders have fully priced in at least a 50-basis-points (bps) rate cut in the remaining year and see a 19.6% chance that the Fed could cut borrowing rates by 75 bps.
   

Technical Analysis: Pound Sterling jumps to near 1.3470
 

(Click on image to enlarge)

The Pound Sterling gains further to near 1.3470 against the US Dollar on Friday. The GBP/USD pair strives to extend its recovery above the 20-day Exponential Moving Average (EMA), which trades around 1.3423.

The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, which indicates a sideways trend.

Looking down, the August 1 low of 1.3140 will act as a key support zone. On the upside, the psychological level of 1.3500 will act as a key barrier.

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