The pound is struggling below 1.2500 against the dollar, and the 200-day moving average is the last line of defense for bulls

Sept. 11 - The pound started the week on a positive note against the dollar, despite a lack of bullish confidence. A small pullback from a multi-week high is expected to support the pair. The hawkish stance of the Federal Reserve and expectations of an end to the Bank of England's rate hike cycle limit upside.

GBP/USD opened with a mild bullish gap on the first day of the new week, and despite no follow-up action, it remained below the psychological level of 1.2500 in the first half of the Asian session.The dollar retreated from a six-month high after recording its longest streak of gains in almost nine years. This week saw some reallocation trading ahead of key US macro data and ECB event risk. The key US August CPI is due on Wednesday, followed by Thursday's PPI and monthly retail sales data. This, combined with the volatility from the much-anticipated ECB decision, will affect dollar price dynamics and provide some meaningful boost to the pound against the dollar.

At the same time, there is a growing acceptance that the Federal Reserve will keep interest rates higher for longer, which remains supportive for the rise in Treasury yields and continues to provide some support for the dollar. In fact, while the Wall Street Journal reiterated its pause in rate hikes in September, it reported that some officials are still leaning towards excessive rate hikes on the grounds that they can cut rates later. This, combined with market expectations that the Bank of England's policy tightening cycle is coming to an end, has done little to help the pound pull up against the dollar from a three-month low hit last week.

The governor of the Bank of England, Andrew Bailey, told MPs last Wednesday that the central bank is close to ending interest rate hikes, but he warned that there could still be further room for borrowing costs to rise due to persistently high inflation. However, the fundamental backdrop mentioned earlier suggests that there is least resistance to the downside path of the pound against the dollar. But bearish traders need to wait for a sustained breakout and accept being below the all-important 200-day simple moving average (SMA), currently in the zone around 1.2425, before placing new bets.

GBP/USD daily chart

At 11:53 on September 11, Beijing time, the pound was quoted at 2497/98