Why has the British Pound slipped to near 1.3300 ahead of the UK budget and Fed rate decision?

• Selling pressure takes GBP/USD towards 1.3300 as losses deepen in Wednesday’s Asian session.
• With global borrowing costs climbing, the UK Finance Minister is due to present his first budget on Wednesday.
• An unchanged policy interest rate remains the likely outcome of the Fed’s October meeting.

Caution ahead of Wednesday’s UK Budget and Federal Reserve (Fed) interest rate decision weighs on the British Pound (GBP) against the US Dollar (USD). During Asian trading on Wednesday, GBP/USD adds to its losses and moves towards 1.3300.

Pressure is building on UK Finance Minister John Healey to offer relief to households struggling with the cost of living while also supporting businesses when he unveils his first budget later in the day. However, elevated government borrowing costs and the substantial tax increases introduced by his predecessor, Rachel Reeves, leave him with limited room for manoeuvre.

Guillermo Felices, PGIM's global investment strategist, said: "It's hard to be immune in an environment where global bond yields are going higher, but among major developed markets, the UK is looking like one of the cleanest dirty shirts out there,"

Expectations broadly favour the Fed retaining its current policy rate target range of 3.75% to 4.0% and offering an indication of the likelihood of a December move. For further guidance on the US interest rate outlook, traders will focus on the speech by Fed Chair Kevin Warsh. Hawkish comments from Fed officials could strengthen the Greenback, putting further pressure on the major currency pair.

According to the CME FedWatch tool, markets assign a nearly 92.8% probability to rates remaining unchanged at the Fed’s October policy meeting. For December, the probability of a US rate hike is 84.4%.

Can GBP/USD Support Levels Hold as Budget Caution Weighs on the Pound?

Ahead of the UK budget, Scotiabank strategists attribute part of Sterling’s weakness to caution, noting that “caution ahead of Wednesday’s UK budget accounts for some of the GBP’s softness against the USD,” while “overnight GBPUSD vols… firmer, reflecting caution ahead of Chancellor Healey’s set-piece delivery tomorrow.” In their view, “a budget that maintains fiscal credibility will likely be GBP-neutral at worst.” The bank’s technical assessment is “neutral/bearish,” with the strategists pointing out that “the GBP retains a soft undertone versus the USD, driving spot below minor support at 1.3350/55.” They warn that this “leaves the October 19th low at 1.3300 exposed and lifts the risk of the pound easing back to the 1.3250/75 range to retrace a little more of its mid-month rebound,” while still expecting that “modest GBP losses should entice support from bargain-hunters.”

Does Greene’s Warning on Wage Disinflation Limit GBP Rate-Cut Expectations?

A slightly hawkish tilt emerges from BoE’s Greene’s focus on stalled wage disinflation and a heightened risk of second-round effects, even though her FXS Speechtracker score of 7.4/10 matches the historical average exactly. Her observations that wage disinflation has stalled above levels compatible with 2% inflation, the economy has displayed “surprising resilience” and labour market slack may already have peaked make the case against an imminent easing cycle. They also lend support to GBP against other currencies.

Even with forward-looking indicators suggesting pay growth closer to 3.5%, Greene’s call to “proactively lean” against second-round inflation risks effectively places less weight on the reassurance offered by moderating wage measures. In currency markets, economic resilience combined with persistent wage pressures suggests that the Bank of England will cut rates more slowly than some peers. This would help contain GBP’s downside, with interest rate differentials continuing to provide modest support.

Technical Analysis: Can GBP/USD Shake Off Its Bearish Bias Below the 100-Day SMA?

A modest rebound from recent lows has not removed the mildly bearish bias on the daily GBP/USD chart, as the pair remains below its 100-day simple moving average (SMA). Consolidation just above the 20-day Bollinger SMA points to underlying demand nearby. However, the Relative Strength Index (14), at around 47, remains below 50, suggesting that bullish momentum is still unconvincing.

Any advance would first encounter resistance at the 100-day SMA around 1.3390, followed by the upper Bollinger Band near 1.3415. Sellers may seek to regain control at that higher barrier if the pair continues to climb. Below current levels, the mid-Bollinger band around 1.3285 offers immediate support, ahead of the stronger cushion at the lower Bollinger Band near 1.3150. A break beneath the latter would likely strengthen the existing bearish bias.

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