The GBP/USD pair continues to advance within its annual trading range. Liquidity was swept below the June 24 low, allowing bullish traders to launch their first attack. This was followed by a reaction to the bearish imbalance 29, a corrective pullback, a move into bullish imbalance 31, a reversal in favor of the pound, and a new upward impulse. There was no second reaction to imbalance 29. A new bullish imbalance 32 formed below, but today's and tomorrow's events have made traders reluctant to revisit this zone before resuming their bullish attacks.
Tomorrow, the Bank of England is expected to tighten monetary policy, which should support bullish traders. However, I do not attribute the pound's current rally to the upcoming meeting of the British regulator, as the pound has already gained more than 100 points today alone. Why has the market suddenly rushed to buy the pound today if the Bank of England's intention to raise interest rates has been known for several weeks? The prospect of monetary policy tightening by the Bank of England has provided a bullish backdrop in recent weeks, supporting the pound. The main catalyst for Wednesday's rally, however, was the outcome of the US congressional elections. In general, nobody doubted that the elections would trigger market volatility and that the Democrats would defeat the Republicans. The pound is continuing its expected upward movement.
Another important factor for the pound's outlook is that traders expect the Bank of England to deliver three rounds of monetary policy tightening, while the Federal Reserve is expected to deliver only one or, at most, two. The dot plot also points to just one policy tightening move over the coming year, and the latest FOMC minutes confirmed that most central bank policymakers expect only one rate hike. Of course, it is impossible to know how events will unfold in 2027, but this is currently the prevailing weighted-average forecast. Therefore, the Bank of England could ultimately raise interest rates more aggressively than the Federal Reserve in the coming months, which is clearly unlikely to support the US dollar. In the near term, only geopolitical developments could support the dollar, particularly if Donald Trump decides to resume the war with Iran. I would also like to point out that it is not advisable to draw parallels between the euro and the pound at this stage. These two currencies have been trading very differently recently.
Do bears have any prospects? In my view, their chances are limited. Over the past two months, bearish traders have pushed the dollar toward the upper end of its trading range. Let me remind you that there were compelling reasons to buy the dollar in 2026, but there were also reasons for the pound to strengthen, which traders often overlooked. As a result, the reverse movement began several weeks ago, and this recovery is much more justified by the underlying market conditions than the preceding decline.
Economic news on Wednesday was of little interest to traders, as reports on the US congressional election results had already started coming in overnight and influenced market sentiment throughout the day.
The overall fundamental backdrop remains such that I can neither expect nor anticipate anything other than a long-term decline in the US dollar. The war between Iran and the United States has not changed my outlook. Geopolitical developments prompted the market to remember the dollar's safe-haven status for several months, but the conflict is currently on hold. Therefore, until hostilities resume, I do not expect another bearish offensive against the pound. Unfortunately, further escalation remains possible, and the media are increasingly using the phrase "nuclear bomb" in their reports. According to some media outlets, Trump could consider using nuclear weapons to force Iran's complete surrender. We can only hope that these reports are untrue.
Economic Calendar for the United States and the United Kingdom
United Kingdom – Bank of England Interest Rate Decision (12:00 UTC).
United Kingdom – MPC Vote on Interest Rates (12:00 UTC).
United Kingdom – Bank of England Monetary Policy Statement (12:00 UTC).
United States – Initial Jobless Claims (13:30 UTC).
The November 5 economic calendar contains four events, with the Bank of England meeting being the main highlight. Economic data and central bank announcements could have a significant impact on market sentiment on Thursday.
GBP/USD Forecast and Trading Tips
The long-term outlook for the pound remains bullish. Bullish traders have controlled market direction in recent weeks, but only within the trading range, which is clearly visible on the daily chart and remains intact. The liquidity sweep below the June lows allowed buyers to regain control. Therefore, I consider the current market structure bullish.
For traders, this means that existing long positions should be maintained for now and new bullish signals should be acted upon if they emerge. Last week, a buy signal formed within imbalance 31. This week, bullish imbalance 32 formed, but the fundamental backdrop pushed sterling higher without a corrective pullback.
The pound's targets are located near the upper boundary of the trading range at 1.3670.
