GBP/USD Strengthens Near 1.3300 After US Credit Downgrade by Moody’s and Weak Economic Data

The British Pound extended its rebound against the US Dollar on Monday, holding firm near the 1.3300 level in the wake of renewed dollar weakness. The decline in USD sentiment followed Moody’s decision to downgrade the United States’ credit rating, citing rising debt burdens and long-term fiscal risks. The downgrade has amplified expectations that the Federal Reserve may ease monetary policy sooner than anticipated, providing tailwinds for GBP/USD bulls.

US Dollar Pressured by Credit Downgrade and Soft Data

Moody’s downgrade of the US long-term credit rating from Aaa to Aa1 is triggering widespread market reaction. The agency warned that US federal debt could surge to 134% of GDP by 2035, up significantly from 98% in 2023. Mounting interest obligations, widening deficits, and weaker tax receipts were cited as key factors behind the downgrade. This move aligns with earlier decisions by Fitch Ratings (2023) and S&P (2011) to strip the US of its top-tier credit status.

Meanwhile, a string of disappointing US economic indicators is deepening concerns over slowing growth. On Friday, the University of Michigan’s Consumer Sentiment Index dropped to 50.8, its lowest reading since June 2022, marking the fifth straight monthly decline. Expectations for a rate cut from the Federal Reserve in the second half of 2025 are gaining momentum as consumer confidence deteriorates and inflation softens.

Pound Sterling Rises on Strong UK GDP Print

The British Pound (GBP) is gaining support from recent UK economic data that surpassed forecasts. Thursday’s GDP report showed both monthly and quarterly growth stronger than expected, signaling underlying resilience in the UK economy. As a result, investors are betting that the Bank of England (BoE) could hold off on rate cuts if inflation remains persistent or reaccelerates.

The UK economy’s solid performance is helping the Pound remain attractive, particularly in a global environment of diverging central bank policies. Markets are closely watching BoE policy expectations, especially in light of sticky core inflation and upward wage pressures.

Trade Optimism and Geopolitics May Limit Dollar Downside

Despite bearish headwinds, the US Dollar could see intermittent support amid signs of improving trade relations and geopolitical dialogue. A preliminary US-China trade agreement—which includes slashing tariffs from 145% to 30% on Chinese goods and from 125% to 10% on US exports—has bolstered global risk sentiment.

Additionally, renewed hopes for a US-Iran nuclear agreement, along with planned talks between President Trump and President Putin, are easing market fears around international conflict, particularly regarding the Ukraine crisis. These developments could inject temporary stability into the greenback, though broad downside pressure may persist.

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📊 GBP/USD Technical Outlook

The pair currently trades near 1.3300, with short-term momentum favoring bulls after reclaiming recent losses. The next immediate resistance zone lies near 1.3360–1.3400, while initial support rests at 1.3200. A sustained move above 1.3400 could signal further upside potential.

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