Pound Rebounds Modestly Despite Stronger US PMI and Hawkish Fed Stance

Sterling/dollar posted modest gains during early European trading on Thursday, last trading around 1.32333 after touching the 1.3240 level earlier. However, the sustainability of this rebound is questionable amid persistently divergent policy path expectations between the Bank of England and the Federal Reserve. The Fed's recent hawkish signals contrast sharply with the BoE's more cautious stance on rate hikes, constituting the core macro factor weighing on the pound.

**US-UK Policy Divergence Remains Key Pressure**

The Fed Chair's hawkish remarks at the Jackson Hole symposium reinforced market expectations that US interest rates will stay higher for longer, providing support for the dollar. In contrast, despite inflation pressures not having fully subsided, the BoE has shown notable hesitation on rate hikes. Market reports indicate that UK services PMI fell sharply due to Middle East turmoil, further weakening the case for continued BoE policy tightening. This "one stepping forward, one stepping back" dynamic in policy expectations significantly caps upside for sterling/dollar.

**Technical Picture Shows Medium-Term Correction Trend Intact**

From a technical chart perspective, the pound's short-term rebound appears more as a technical correction. The current exchange rate remains below the mid-band of the daily Bollinger Bands, with that moving average continuing to slope downward, indicating the medium-term weak pattern has yet to reverse. Short-term moving averages are capping price action, with multiple recent rebound attempts failing to hold above them. The MACD indicator sits below the zero line, and while the green histogram has shortened slightly—suggesting modestly reduced bearish momentum—no clear bullish reversal signal has emerged. If the pair fails to reclaim the 1.3320 area, it may retest previous lows again.

**External Risk Sentiment Unlikely to Provide Sustained Support**

Geopolitical tensions also exert indirect pressure on the pound. Reports indicate elevated risks of escalation in Middle East conflicts, with market risk aversion intermittently intensifying—a dynamic that typically supports the dollar while weighing on risk-sensitive currencies like the pound. Although energy price volatility could affect UK inflation prospects, given the BoE's current policy focus, any brief boost from external factors is likely to remain limited.