British Pound finds further gains elusive as BoE’s policy decision approaches

• After reaching a session high of 1.3500 against the US Dollar, the British Pound eases ahead of the BoE’s monetary policy decision.
• A 25 bps interest rate increase to 4% from the BoE is considered almost certain.
• With US Democrats taking control of both the House and the Senate, the US Dollar faces broad selling pressure.

The Bank of England’s (BoE) monetary policy decision is due at 12:00 GMT on Thursday, with the British Pound (GBP) under pressure ahead of the announcement. Sterling is struggling to build on its rally beyond 1.3500 against the US Dollar (USD).

BoE takes centre stage as Deutsche Bank anticipates first rate rise since 2023

Among the key events on today’s calendar, Deutsche Bank analysts highlight the BoE’s policy announcement at “12:00 London time”. In their assessment, the central bank is “widely expected to deliver their first-rate hike since 2023, with a 25bp move that takes their policy rate up to 4%.”

In their outlook, Deutsche Bank’s UK economists “expect there to be a 6-3 vote tally in favour of a hike. This is in contrast to views from strategists at Brown Brothers Harriman (BBH) who believe that the vote split will be at 7-2 with doves Alan Taylor and Swati Dhingra supporting a hold.

Deutsche Bank added that they think the big changes will come in the form of the BoE’s updated forecasts.” More specifically, their forecast is that “the Bank will show peak CPI nearer 4.25% in Q1 2027, although they also expect an upgrade to the 2026 growth forecast to 1.4%.”

A modest rebound in the US Dollar is also curbing gains in GBP/USD. Having retested the previous day’s monthly low of 101.10, the US Dollar Index (DXY) has recouped most of its earlier losses during European trading, leaving it slightly lower at around 101.44. The index tracks the Greenback against six major currencies.

Political turmoil in the United States (US) is expected to keep the US Dollar under pressure. According to ING, the US Democrats’ midterm election victory has heightened concerns over “gridlock on the debt ceiling, a prolonged government shutdown next year”.

GBP/USD retains a bullish technical bias

Trading at 1.3482 on the daily chart, GBP/USD retains a bullish near-term outlook while remaining above both the 20-day Exponential Moving Average (EMA) at 1.3370 and the 61.8% Fibonacci retracement at 1.3471. Support from reclaimed Fibonacci levels clustered between approximately 1.3470 and 1.3408 underpins that positive picture. With the Relative Strength Index (14) near 65, momentum remains firmly positive, suggesting continued upward pressure even as the indicator approaches overbought territory.

The first resistance on the upside lies at 1.3561, the 78.6% Fibonacci retracement, ahead of the 100% retracement and recent swing high around 1.3676. Support initially comes in at the 61.8% retracement of 1.3471. Below that sit the 50% level at 1.3408 and the 20-day EMA at 1.3370. A break below these levels would bring lower Fibonacci supports at 1.3344 and 1.3266 into view, followed by the structural floor near 1.3140.

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