Pound gives up BoE rate-hike gains ahead of Friday's US payrolls

• After stalling at 1.3500, GBP/USD looks set to record its first decline in seven sessions.
• The vote to raise rates was unanimous among all nine members, but BoE Governor Bailey cautioned against expecting a series of increases.
• Friday's October payrolls release is expected to show 65K, compared with September's 29K.

A fully priced-in increase took the UK's Bank Rate to 4% on Thursday, as the Bank of England (BoE) delivered its decision and sterling's six-session advance stalled just above 1.3500. Having reached that level on Wednesday for the first time since mid-September, GBP/USD revisited it on Thursday before trading near 1.3450. The pair is heading for its first decline in seven sessions.

Although all nine members backed an increase, with one favouring a half-point rise, BoE Governor Bailey cautioned that the move should not be interpreted as the start of a series. From September's 3.5%, inflation is projected by the BoE to reach around 5% by mid-2027. Following the vote, markets assign a roughly one-in-two chance to a December increase, up from one in three beforehand, and price in a further three-quarters of a point by the end of 2027.

After falling to a one-month low on Wednesday following the Democrats' capture of both houses of Congress, the dollar has recouped some of its losses. Jobless claims declined to 189K, below the 196K forecast, while third-quarter unit labour costs dropped 0.7% rather than increasing by the expected 0.6%. Markets now put the probability of a December Fed rate rise at around 70%, down from above 80% on Wednesday. At 4%, Bank Rate now equals the upper end of the Fed's 3.75%-4.00% range.

Payrolls and inflation lead the economic calendar

A 65K increase is forecast for October Nonfarm Payrolls (NFP), following September's 29K, with the figures due on Friday at 13:30 GMT. Friday also brings speeches from New York Fed President Williams at 09:30 GMT and Fed Governor Bowman at 17:15 GMT. Due at 13:30 GMT on Tuesday, 10 November, October's Consumer Price Index (CPI) is expected to rise 0.3%, following 0.6%. Together, these releases and speeches will inform the Fed's 8-9 December meeting.

Monday's schedule includes a speech by BoE Governor Bailey at 17:25 GMT. On Tuesday, BoE Deputy Governor Lombardelli speaks at 12:30 GMT, followed by BoE Chief Economist Pill at 18:30 GMT. Following growth of 0.5%, third-quarter Gross Domestic Product (GDP) figures are scheduled for 07:00 GMT on Thursday, 12 November, and will inform the BoE's December meeting.

GBP/USD retreats as daily momentum turns lower

Contained within Wednesday's range, Thursday's bar shows a retreat from the high that has retraced roughly a quarter of the advance from the 28 October low just above 1.3250. GBP/USD remains above its 50-day Exponential Moving Average (EMA), which sits just above 1.3350, and its 200-day EMA, just below 1.3400. The 50-day average nevertheless remains beneath the 200-day. In overbought territory, daily momentum has begun to weaken.

GBP/USD daily price chart