GBP/USD Price Analysis: Can Pound Break $1.3345 as PMI Hits?

GBP edges higher on Tuesday, trading $1.3325 in early Europe. The move comes after the UK’s Final Services PMI was 49.0, slightly above expectations but below 50. This means the services sector is cooling but not contracting sharply. The modest beat gave GBP/USD a small lift as traders weigh near-term policy risks. The PMI release added to Sterling’s strength as the US Dollar weakened, with investors taking a cautious stance before Wednesday’s Fed decision. Political stability in the UK, with Friedrich Merz to be sworn in as Germany’s next Chancellor, has also calmed the broader European market. Fed’s “Wait and See” holds the Dollar back The US Dollar is soft, with the Dollar Index near 100.0. Tuesday’s US economic calendar brings more dollar-related headwinds: Trade Balance -$136.8B (vs -$122.7B previously) RCM/TIPP Economic Optimism 50.2 (from 49.1) 10-year bond auction yield 4.44% Despite the optimism gauge and bond auction, markets expect the Fed to keep rates steady 4.25%-4.50% for the third time. This reflects the broader reluctance to act prematurely with fiscal and trade uncertainties under Trump’s new economic agenda. US Treasury Secretary Scott Bessent is optimistic. Speaking to CNBC, he said growth could rebound to 3% next year and would gradually lower the US deficit by about 1% annually. But markets are divided due to stagflation concerns and supply chain risk from tariffs. GBP/USD Technical Outlook: Breakout Watch GBP/USD is pushing against the top of the triangle near $1.3345. The 50-period EMA at $1.3297 has been re-taken, while the MACD is neutral, suggesting a volatility spike. Trade Setups: Buy above $1.3345, target $1.3382, stop $1.3280 Sell below $1.3260, target $1.3230, stop $1.3320Wait.