BoE rate hike bets bolster Cable as British Pound shrugs off strong US GDP

• Stronger US economic figures fail to prevent GBP/USD rising 0.19% to 1.3340.
• A 3.4% expansion in US GDP accompanies a rise in Core PCE inflation to 3.1%.
• With December Fed tightening odds at 81%, markets also factor in a November BoE rate rise.

US GDP beat forecasts, inflation increased and the labour market remained robust, yet the Pound Sterling strengthens against the US Dollar on Thursday. GBP/USD stands at 1.3340, a gain of 0.19%, despite the firm US economic figures.

GBP/USD climbs despite firm US growth and elevated Core PCE as markets await next week’s BoE rate rise

Preliminary US Gross Domestic Product (GDP) figures showed growth of 3.4% YoY, above the 3.2% forecast and Q2’s 2.2% reading. Resilient consumer spending also accelerated, reaching 3.6% YoY from 3.4% previously and suggesting that economic activity is heating up.

Inflation is rising alongside the economy. An increase of 3.1% YoY in the Core Personal Consumption Expenditures (PCE) Price Index matched expectations. As the Fed’s preferred inflation measure, the reading strengthened the case for additional tightening, after the US central bank left rates unchanged on Wednesday.

Meanwhile, jobless claims fell to 194K from 195K in the week ending 24 October, against forecasts of an increase to 199K.

Following the releases, traders assigned an 81% probability to a 25-basis-point Fed rate rise at the 9 December meeting, an increase in the likelihood of a hike.

UK traders, meanwhile, assessed the budget delivered by Finance Minister John Healey. He said he would increase rates on banks, gambling, savers, landlords and online shopping, while also planning measures to tackle high energy prices.

Attention among GBP/USD traders also turns beyond the budget to next week’s Bank of England (BoE) policy meeting. According to Prime Terminal, market pricing incorporates a 25-basis-point increase in November, followed by another next February.

GBP/USD Price Forecast: Recovery Remains Constrained by Resistance

Trading at 1.3368 on the daily chart, GBP/USD retains a slightly bearish bias. The cluster of simple moving averages around 1.3385 and descending trend-line resistance at 1.3393 continue to cap the spot price. Although the pair has recovered some of its recent losses and the Relative Strength Index (14) reading of 54.4 suggests momentum is improving, the wider price structure remains below former rising support lines near 1.3652 and 1.3830, which now act as resistance. This points to a recovery with limited upside rather than an established bullish trend.

The first hurdle on the upside is the simple moving average cluster around 1.3385, just ahead of descending trend-line resistance at 1.3393. A sustained move through both would clear the way towards the former rising support lines near 1.3652 and 1.3830, now resistance. Below the market, the closest significant area of demand lies around 1.3253, where the pair previously broke through a descending resistance trend line. Buyers could seek to cushion a corrective retreat at that level.

(The technical analysis of this story was written with the help of an AI tool. Know more.)