British Pound holds near 1.34 as BoE rate-hike expectations overshadow Fed uncertainty

• GBP/USD inches towards 1.3400 as Sterling buying interest holds firm.
• Markets fully price in a November BoE rate rise, which could erase the US-UK interest rate gap.
• Robust GDP and inflation fail to prevent December Fed rate rise odds slipping to 70%.

Expectations of a Bank of England (BoE) rate rise next week are supporting the Pound Sterling, which has gained 0.04% against the US Dollar to trade near 1.3400. While traders appear confident of BoE tightening, they have scaled back hawkish bets on the Fed despite Thursday’s robust US data.

GBP/USD finds support as November BoE rate rise expectations hold firm and December Fed bets recede

Growth of 3.4% YoY in Q3 showed the US economy expanding at a healthy pace, far exceeding forecasts. Inflation consequently remains elevated: the Core PCE measure rose to 3.1% YoY, above September’s reading but consistent with forecasts. Although these figures would strengthen the case for a Fed rate rise, Prime Terminal shows investors have reduced the implied probability to 70% from around 84% on Wednesday following the Fed’s decision.

Meanwhile, US equities have come under heavy selling pressure, particularly in the technology sector. The Nasdaq has fallen over 3% after technology companies delivered “disappointing tech earnings”, as described in a Bloomberg article.

Investors responded favourably to the UK budget. Finance Minister John Healey delivered the first budget of PM Andy Burnham’s administration, keeping it aligned with former Chancellor Reeves’ fiscal rules.

The Bank of England is also expected to lift the Bank Rate to 4%, with swaps markets assigning a 100% probability to the move. Should the BoE deliver the anticipated increase, GBP/USD would be positioned to extend its recovery as the US-UK interest rate differential narrowed to 0.

US calendar fills with activity and employment releases next week

A busy US economic calendar next week brings October’s ISM Manufacturing and Services PMI releases alongside a series of employment reports. Labour market figures will include JOLTS, ADP Employment Change and Initial Jobless Claims, culminating in the week’s main release, Nonfarm Payrolls.

GBP/USD Price Forecast: Technical signals point to a modest bullish bias

Trading at 1.3392 on the daily chart, GBP/USD retains a modestly bullish short-term bias above the cluster of three simple moving averages near 1.3380. This positioning suggests underlying buying interest following the recapture of the former resistance trend line at 1.3251, which now provides structural support. A descending resistance trend line is being tested, with a break point near 1.3391. Meanwhile, the Relative Strength Index (14) reading of 56.7 indicates positive momentum without yet signalling overbought conditions.

A clear break above the nearby trend-line pivot at 1.3391 would bring the rising former support lines around 1.3656 and 1.3833 into focus as the next resistance levels. Initial support lies in the 1.3392 area, ahead of the three simple moving averages at 1.3380 and the recaptured descending trend line near 1.3251. A break below the latter would undermine the prevailing bullish bias and leave room for a deeper corrective decline.

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