British Pound struggles to extend gains ahead of BoE’s policy decision

  • British Pound retreats from its day’s high of 1.3500 against the US Dollar ahead of BoE’s monetary policy.
  • The BoE is almost certain to hike interest rates by 25 bps to 4%.
  • The US Dollar is broadly under pressure as US Democrats take control of both the House and the Senate.

The British Pound (GBP) faces pressure in an attempt to extend the rally above 1.3500 against the US Dollar (USD) on Thursday. The British currency comes under pressure ahead of the Bank of England’s (BoE) monetary policy decision at 12:00 GMT.

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BoE decision in focus as Deutsche Bank looks for first rate hike since 2023

Analysts at Deutsche Bank flag the BoE’s policy announcement at “12:00 London time” as one of the main highlights on today’s calendar. They note that the BoE 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 preview, 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.” In particular, they anticipate 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%.”

Meanwhile, a slight recovery in the US Dollar is also limiting the upside in the GBP/USD pair. In the European trade, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, has recovered a majority of its early losses and is marginally down to near 101.44. The DXY rebounded after revisiting the monthly low of 101.10 posted the previous day.

The US Dollar is expected to remain under pressure amid United States (US) political turbulence. The victory of US Democrats in midterm elections has boosted fears of “gridlock on the debt ceiling, a prolonged government shutdown next year”, ING reported.

GBP/USD Technical Analysis

In the daily chart, GBP/USD trades at 1.3482, maintaining a bullish near-term bias as it holds above the 20-day Exponential Moving Average (EMA) at 1.3370 and the 61.8% Fibonacci retracement at 1.3471. The cluster of reclaimed Fibonacci supports between roughly 1.3470 and 1.3408 reinforces the constructive tone, while the Relative Strength Index (14) around 65 shows firm positive momentum, hinting that upside pressure persists but is edging towards overbought territory.

On the topside, immediate resistance is seen at the 78.6% Fibonacci retracement at 1.3561, with a further barrier at the 100% retracement and recent swing high near 1.3676. On the downside, initial support is located at the 61.8% retracement at 1.3471, followed by the 50% level at 1.3408 and the 20-day EMA at 1.3370; a break beneath these would expose deeper Fibonacci support at 1.3344 and 1.3266, ahead of the structural floor around 1.3140.

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