British Pound holds near 1.3400 as markets price in a BoE rate hike

• Around 1.3390, GBP/USD trades little changed during Monday’s Asian session.
• A rise in the Bank Rate to 4.0% at the BoE’s November policy meeting is heavily priced into markets.
• Thursday’s BoE rate decision comes into focus for traders before the release of US jobs figures.

With Thursday’s Bank of England (BoE) interest rate decision and Friday’s US jobs figures for October approaching, traders are reluctant to take fresh positions. GBP/USD is consequently little changed around 1.3390 in Monday’s Asian trading session as market participants await this week’s key events.

A rise in the Bank Rate from 3.75% to 4.0% is expected at Thursday’s November policy meeting, according to economists surveyed by Reuters. Such a move would mark the BoE’s first increase since August 2023, when inflation was still above its 2% target. Expectations of a hawkish BoE could lend the British Pound (GBP) some support against the US Dollar (USD).

Alexander Harvey, UK economist at consultancy Oxford Economics, said: "While we don't expect a clear steer from the Committee on how many hikes they're planning, it's possible that the meeting minutes or Bailey ... signal that Bank Rate is unlikely to reach the level that is priced in by financial markets,"

Alongside the US midterm elections, this week’s employment report will attract close attention. Forecasts point to a September increase of 65,000 in Nonfarm Payrolls (NFP), with the Unemployment Rate expected to remain at 4.2% over the same period. Evidence of a strengthening US labour market could support the Greenback, putting near-term pressure on the major currency pair.

GBP retains support as priced-in BoE tightening raises the hurdle for further gains

The latest UK Budget has been an important stabilising influence, according to OCBC strategists, who say the Pound has “held up better than expected despite the fiscal strain from higher energy costs,”. In their assessment, the Budget “avoided adding to those concerns,” because it “stayed within the fiscal rules and preserved GBP15bn of headroom against the stability rule, even after absorbing some of the impact from the Middle East conflict.”

A wider UK environment that “remains relatively supportive.” also features in OCBC’s assessment. The bank says growth has “proved resilient,” and notes the OBR’s upward revision of its “2026 growth forecast to 1.2%.” The strategists argue that “greater political stability and fiscal discipline should continue to offer GBP some relative support,” and that “closer UK-EU economic ties could provide an additional medium-term tailwind.”

Further gains face a higher hurdle, however, with OCBC warning that “the easy gains may be behind us.” According to the bank, markets are “already pricing an aggressive Bank of England tightening cycle, with a November hike heavily discounted and substantially more tightening priced into 2027.” Given that there is “plenty of tightening already in the price,” its conclusion is that “the bar for the next leg higher in GBP is getting increasingly high.”

Greene’s warning on stalled wage disinflation curbs GBP rate-cut expectations

At 7.4/10, BoE policymaker Greene’s FXS Speechtracker score matches Greene’s historical average exactly. This points to an unchanged hawkish tone, rather than a more forceful stance. Greene’s emphasis on wage disinflation stalling above levels consistent with 2% inflation, coupled with the view that policy should act proactively against second-round inflation risks, strengthens the bias towards keeping UK interest rates higher for longer. That offers marginal support to GBP.

Despite forward-looking indicators suggesting pay growth nearer 3.5% and an economy displaying unexpected resilience, Greene sees a greater risk of second-round effects than previously thought. Those remarks indicate little inclination to ease policy in the near term. Signs that labour market slack may have peaked also highlight worries about a resurgence in wage pressures. Taken together, the speech reflects a steady-to-hawkish position, restraining expectations of aggressive BoE rate cuts and supporting GBP against its peers.

Technical Analysis: GBP/USD retains a modest near-term bullish bias

Holding above both the 100-day simple moving average (SMA) and the Bollinger Bands’ middle SMA, GBP/USD retains a modestly bullish near-term outlook on the daily chart. There appears to be scope for additional gains while the price remains below the upper Bollinger band. Meanwhile, the Relative Strength Index (14), at around 56, signals a constructive backdrop without indicating overbought conditions.

The upper Bollinger band around 1.3450 provides the first resistance level, where the recent advance could encounter selling interest. Initial downside support lies at the 100-day SMA of 1.3385, ahead of the middle Bollinger band at 1.3310. Should the correction deepen, the lower Bollinger band near 1.3175 offers a further cushion.

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