Can the British Pound stay near a seven-week high as US elections weigh on USD and BoE looms?

• GBP/USD slips below 1.35 after touching 1.3503, its highest level in seven weeks.
• The US Dollar comes under pressure as election results favour Democrats.
• Markets fully price in a BoE rate hike, with US Nonfarm Payrolls due on Friday.

A rally in the Pound Sterling takes it to a seven-week high against the US Dollar on Wednesday, following US midterm elections that leave the Democrats poised to secure both the US House of Representatives and the US Senate.  The outcome represents a major setback for US President Trump, who congratulated the Democrats and signalled a willingness to negotiate with them. Trading close to 1.3500, GBP/USD is up 0.55%.

Can GBP/USD extend its rally towards 1.3500 as US election results weigh on the USD ahead of the BoE?

With polls indicating that US voters wanted the Democrats to act as a counterweight to the White House, the US Dollar Index (DXY) declined by over 0.47% to 101.41. The index measures the Dollar against six currencies. US Treasury yields also moved lower while US equities gained, as some analysts observed that markets performed better when no single party could pass legislation through a party-line majority.

Talks on the US-Iran conflict carried on despite Iran reporting the destruction of a US drone. Citing unnamed sources, CCTV reported that a senior Iranian official said Tehran remained far from an agreement with the US to end the conflict.

Oil prices nevertheless eased, with market participants speculating that Washington and Tehran could reach an agreement in the near term.

At 54.5, the US ISM Services Purchasing Managers’ Index (PMI) for October fell short of the 54.8 forecast and was down from 54.9 in the previous month. Within the survey, employment strengthened, whereas new orders and prices paid declined but stayed in expansionary territory.

An earlier release, October’s ADP Employment Change, indicated steady private-sector hiring. Companies added 86K workers, beating expectations of 69K.

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

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

GBP/USD Price Forecast: Can the bullish technical bias hold?

A bullish near-term bias remains intact on the daily chart, where GBP/USD trades at 1.3465. Spot is holding above the latest simple moving average at 1.3368 and the reclaimed break of the downward resistance trend line at 1.3384. The earlier bearish break level of 1.3239 also lies below the pair and now acts as underlying demand. At 63, the Relative Strength Index (14) points to robust positive momentum that is not yet extreme, lending support to the constructive outlook.

Initial downside support sits near the current price zone of 1.3465. Below that, the former downward trend line break around 1.3384 and the simple moving average cluster at 1.3368 precede deeper structural demand at the old resistance break near 1.3239. For buyers, the first upside hurdle is the break of the upward-sloping support trend line around 1.3676. A further barrier lies at the second rising trend line break near 1.3849, where a rejection would suggest a pause in the ongoing rally.

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