Pound Sterling flattens against US Dollar after Trump-Xi trade talks

• The Pound Sterling gives back early gains and turns flat around 1.3200 against the US Dollar.
• The US Dollar rebounds after China confirms it will resume rare earth exports to Washington.
• On Wednesday, the Fed reduced interest rates and downplayed hopes for further monetary expansion this year.

The Pound Sterling (GBP) flattens around 1.3200 against the US Dollar (USD) during the European trading session on Thursday. The GBP/USD pair turns flat as the US Dollar has recovered its early losses, following comments from United States (US) President Donald Trump and China's commerce ministry after the meeting between Trump and Chinese leader Xi Jinping.

At the press time, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades flat around 99.20.

After trade talks with Chinese leader Xi, US President Trump has claimed that the "meeting with Xi was amazing". He said, "On a scale of 1 to 10, the meeting with Xi was a 12". Trump further added that tariffs on China will be 47% - down from 57% - there will be no roadblocks on rare earth exports to Washington and the purchase of soyabeans by Beijing will begin immediately.

In response, the Chinese commerce ministry has stated that Beijing will suspend export control measures announced on October 9 for a year, and will expand agricultural trade with Washington.

Signs of improving US-China trade relationship are favorable for the US Dollar.

Daily digest market movers: Pound Sterling gains temporary cushion against US Dollar

• The Pound Sterling gains a temporary ground against the US Dollar on Thursday after revisiting an almost six-month low around 1.3140 the previous day. The Cable fell sharply on Wednesday after the Federal Reserve (Fed) decision to reduce interest rates by 25 basis points (bps) to 3.75%-4.00%.
• This was the second straight interest rate cut by the Fed this year. The central bank was expected to announce a dovish interest rate decision, as recent US Consumer Price Index (CPI) data release has signaled that the impact of tariffs on inflation is not persistent. Additionally, deteriorating labor market conditions and the ongoing federal shutdown remained key reasons behind the Fed's rate cut announcement.
• Fed Chairman Jerome Powell also stated that the cut was "risk management" as the job creation has remained "very low".
• Technically, lower interest rates by the Fed bode poorly for the US Dollar; however, the Greenback strengthened after Chair Powell argued against further monetary easing in the December policy meeting. "Another cut in December is far from assured, as inflation remains somewhat elevated relative to the goal," he said.
• Powell's comments signaling no support for an interest rate cut in December led investors to revise their dovish expectations. According to the CME FedWatch tool, traders see a 70% chance that the Fed will hold interest rates steady in the range of 3.75%-4.00% in December, significantly increased from 9.1% seen on Tuesday.
• In the United Kingdom (UK), the major trigger for the British currency will be expectations regarding the upcoming Bank of England's (BoE) monetary policy scheduled next week. Analysts at Goldman Sachs wait for the BoE to cut interest rates by 25 bps to 3.75% on November 6. The investment banking firm turns dovish for November's monetary policy due to the softening labor market.
• Contrary to Goldman Sachs, a recent Reuters poll showed that economists expect there will be no further interest rate cuts by the BoE this year, and the central bank will restart the monetary-easing campaign in the first quarter of 2026.

Technical Analysis: Pound Sterling wobbles around 1.3200

The Pound Sterling trades in a tight range around 1.3200 against the US Dollar on Thursday. The GBP/USD pair finds a temporary support after refreshing an almost six-month low near 1.3140 on Wednesday. The outlook for the cable remains bearish as it trades below the 200-day Exponential Moving Average (EMA), which is around 1.3295.

The 14-day Relative Strength Index (RSI) falls below 40.00, indicating that a fresh bearish momentum has emerged.

Looking down, the psychological level of 1.3000 will act as a key support zone. On the upside, the October 28 high around 1.3370 will act as a key barrier.