The British pound held steady above 1.3050 in European trading hours on Thursday, supported by a weaker U.S. dollar amid concerns over a potential government shutdown in Washington. Investors, however, remained cautious as they awaited the Bank of England’s (BoE) policy announcement for clearer direction.
At the same time, the dollar’s retreat provided modest relief to the Pound, though gains were limited by expectations that the BoE could soon shift toward an easing stance. The upcoming decision is being closely monitored for fresh policy cues, with traders seeking clarity on the central bank’s rate trajectory.
“Markets are treading lightly before the BoE decision, given persistent inflationary pressures and weakening UK growth,” one analyst noted.
Technical Outlook: Resistance Near 1.33
From a technical standpoint, the pair’s overnight close below 1.3300 signaled renewed pressure on GBP/USD. Momentum indicators remain deeply negative, suggesting a fragile near-term bias. Analysts caution that failure to sustain current levels could trigger another leg lower.
Key technical levels to watch include:
- Support: 1.3140 – August monthly low
- Resistance: 1.3245–1.3300 range
- Breakout target: 1.3365–1.3400 zone
A decisive break below 1.3140 could mark a fresh bearish phase, opening the door for deeper declines. Conversely, a sustained move above 1.3300 may encourage short-covering and spark a limited rebound toward mid-1.3400s.
The market’s technical posture, however, remains tilted in favor of GBP sellers, reflecting overall economic fragility and shifting rate expectations.
Fiscal Pressures Add to Sterling’s Strain
The UK Office for Budget Responsibility (OBR) is reportedly preparing to cut productivity forecasts by 0.3%, potentially widening the fiscal gap by over £20 billion. The news has fueled expectations that Finance Minister Rachel Reeves’ Autumn Budget on November 26 will emphasize fiscal restraint.
This comes as inflation data continues to ease. The British Retail Consortium (BRC) reported that food prices fell 0.4% month-on-month in October, the sharpest drop since December 2020, while overall shop prices declined for the first time since March.
These trends have strengthened the market view that the BoE may cut rates by 25 basis points in December, with traders pricing in a 68% probability of such a move.
Meanwhile, across the Atlantic, traders are also watching the Federal Reserve’s policy decision. The Fed is widely expected to cut interest rates by 25 basis points, with Chair Jerome Powell’s comments likely to determine the U.S. dollar’s next move—and, by extension, GBP/USD’s short-term direction.
Despite modest support from the dollar’s weakness, the overall tone for Sterling remains cautious, as both fiscal and monetary headwinds continue to weigh on the UK’s economic outlook.