FX.co ★ GBP/USD

The British pound (GBP/USD) held steady at approximately 1.3490 at the start of European trading on Thursday, showing a slight upward trend. This is primarily due to the general weakness of the US dollar (USD) following the results of the US midterm congressional elections. Washington has seen a significant shift in the political balance of power, with the Democrats securing a majority of seats in both the Senate and the House of Representatives, wresting control from the Republicans; they not only maintained their existing positions but also captured key seats in traditional conservative strongholds. The market interpreted the Democratic victory as a clear rejection of President Donald Trump’s political agenda, signaling the potential for fiscal gridlock and a reduction in government spending. Assessing the market reaction, Ray Attrill, Head of FX Strategy at the National Australia Bank, noted that many recent price movements—most notably the decline in US Treasury yields and the subsequent weakening of the US dollar—can be directly linked to the election results. Market focus has quickly shifted toward the Bank of England’s monetary policy decision, which is set to be announced later today. Markets widely anticipate that the Bank of England will raise its key interest rate by 25 basis points, from 3.75% to 4.00%. If implemented, this would mark the first interest rate hike by the Bank of England since August 2023, reflecting the central bank’s ongoing efforts to curb persistent domestic inflationary pressures. The money market has already priced in a hawkish policy trajectory, anticipating at least three additional 25-basis-point hikes over the coming year, in, addition to the increase scheduled for November. This projected path of monetary tightening would keep UK interest rates above those expected in the United States, providing strong support for the British pound. Foreign exchange strategists at Scotiabank note that the movement of the pound against the US dollar has largely tracked the rise of the euro against the dollar; despite limited positive news from recent UK economic data—such as slight downward revisions to the October Purchasing Managers' Index (PMI) readings for the services and composite sectors, to 52.8 and 52.9, respectively—the pound continues to closely follow the euro’s upward trend. Scotiabank emphasizes that the market’s focus remains firmly on the Bank of England’s monetary policy outlook and the trajectory of interest rates. The swaps market has already priced in approximately 75 basis points of additional monetary policy tightening following the November meeting.

From a technical perspective, the GBP/USD pair remains in an uptrend on the daily chart, trading firmly above the 100-day simple moving average (at 1.3390) and the middle Bollinger Band (the 20-period moving average, around 1.3345). The current price is actively testing the upper boundary of the recent trading range; the 14-day Relative Strength Index (RSI) is hovering around 66, signaling strong bullish momentum while also suggesting that the pair is approaching overbought territory. On the upside, immediate technical resistance lies at the upper Bollinger Band (around 1.3505). A daily close above this resistance level would pave the way for a retest of the July 15 high (1.3558); should bullish momentum intensify, the price could reach the August 25 high (1.3655). Conversely, initial structural support is found at the 100-day moving average (1.3390), followed by the middle Bollinger Band (around 1.3345). A decline below these support levels would weaken the current uptrend and could lead to a test of the lower Bollinger Band (around 1.3185).