British Pound holds near seven-week high ahead of BoE as US elections weigh on USD

• After reaching a seven-week peak at 1.3503, GBP/USD slips back below 1.35.
• Election results favouring the Democrats weigh on the US Dollar.
• Markets fully price in a BoE rate increase before Friday’s US Nonfarm Payrolls release.

US midterm election results point to Democratic victories in both the US House of Representatives and the US Senate, lifting the Pound Sterling to a seven-week high against the US Dollar on Wednesday.  The outcome marks a significant setback for US President Trump, who congratulated the Democrats and signalled a willingness to negotiate with them. GBP/USD is trading close to 1.3500, a gain of 0.55%.

GBP/USD climbs towards 1.3500 as US election results weigh on the USD ahead of the BoE decision

Following polls indicating that US voters wanted the Democrats to act as a counterweight to the White House, the US Dollar Index (DXY) slipped by over 0.47% to 101.41. The index measures the dollar against six currencies. US Treasury yields also declined, while US equities gained ground. Some analysts observed that markets performed better when neither party could pass legislation solely through its own majority.

Talks over the US-Iran conflict carried on despite Iran’s report that a US drone had been destroyed. Citing unnamed sources, CCTV reported that a senior Iranian official said Tehran remained far from an agreement with the US to end the conflict.

Nevertheless, speculation that Washington and Tehran might reach an agreement soon nudged oil prices lower.

October’s US ISM Services Purchasing Managers’ Index (PMI) fell to 54.5 from 54.9 a month earlier, missing the forecast of 54.8. Within the survey, the employment component increased. New orders and prices paid both declined, although they stayed in expansionary territory.

An earlier release, October’s ADP Employment Change report, indicated that private-sector hiring remained steady: companies added 86K workers against a forecast of 69K.

Attention in the UK turns to Thursday’s Bank of England policy announcement. According to Prime Terminal, money markets had assigned a 100% probability to a rate rise, while pricing put the likelihood of a further Bank Rate increase at the December meeting at 26%.

Thursday’s US calendar includes Initial Jobless Claims for the week ending 31 October and speeches from Fed officials. Focus then shifts to Friday’s Nonfarm Payrolls report, for which analysts expect the US economy to add 65K people to the workforce.

GBP/USD Price Forecast: Near-term technical bias remains bullish

With GBP/USD at 1.3465 on the daily chart, the near-term bias remains bullish. The spot rate is holding above both the latest simple moving average at 1.3368 and the reclaimed break of downward trend-line resistance at 1.3384. The earlier bearish break level of 1.3239 also lies below the pair and now provides underlying demand. A Relative Strength Index (14) reading of 63 points to solid positive momentum that is not yet extreme, supporting the constructive outlook.

Initial downside support sits near the current trading area of 1.3465. Below that come the former downward trend-line break at around 1.3384 and the simple moving average cluster at 1.3368, followed by deeper structural demand around the old resistance break near 1.3239. For buyers, the first resistance is the break of upward-sloping trend-line support at around 1.3676. The second rising trend-line break near 1.3849 presents a higher hurdle, where a rejection would suggest a pause in the advance.

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