GBP/USD Holds $1.3380 as BoE’s 25bp Cut Looms and Fed Bets Keep Dollar in Check
During European trading, the GBP/USD rate hovered around $1.3380 today, building on earlier gains but remaining neutral...
Quick overview
- The GBP/USD rate is stable around $1.3380 as traders await significant UK and US economic data.
- The Bank of England is expected to cut interest rates to 3.75% next week, reflecting easing inflation and a cooling labor market.
- US dollar weakness is attributed to changing expectations about Federal Reserve interest rate cuts, with key economic releases this week likely to influence market sentiment.
- Technical indicators suggest GBP/USD will remain in a narrow trading range until clearer signals emerge from policymakers.
During European trading, the GBP/USD rate hovered around $1.3380 today, building on earlier gains but remaining neutral as investors sat tight, awaiting a deluge of important UK and US data. The fact that the pair is so calm at the moment suggests that traders aren’t feeling too confident in making big bets – they’re holding fire till they get some clearer signs from the big policy makers on both sides of the Atlantic.
In the UK, all eyes are on the Bank of England, as markets are almost certainly expecting it to cut interest rates by 25 basis points to 3.75% by this time next week. This is a clear signal that they’re starting to take their foot off the brake as inflation eases and the labour market cools. Deutsche Bank is even predicting a really tight vote – 5 to 4 in favour of the cut – which goes to show how divided the Monetary Policy Committee still is.
BoE Outlook and UK Data in the Spotlight
The last round of data has really tipped the balance in favour of a cut now. We got core inflation at 3.4% for the year in October, which was the lowest it’s been since March, and we’re expecting it to stay at that level in November. And then on the jobs front, we’re expecting the figures to come out on Tuesday, showing a bit of a rise in unemployment and a slowing in wage growth; meanwhile, early December PMIs will give us a snapshot of how business is looking as we head towards the end of the year.
All of these numbers are going to add to the uncertainty around sterling, which is going to shape the near-term risks for the currency:
- If wages come in lower than expected, that will only reinforce the case for the Bank of England to ease in the first place.
- If services inflation turns out to be stickier than everyone thought, that may temper expectations beyond this one meeting.
- If the PMIs are really weak, that’s adding to the pressure on the growth outlook.
US Data and Fed Expectations are keeping the Dollar in Check
Meanwhile, over in the US, the dollar is still looking weak – it’s near an eight-week low, and it’s all because people are changing their minds about what the Federal Reserve will do with interest rates in 2026. Markets are now pricing in a 64.3% chance of at least two rate cuts by the end of next year, well beyond what the Fed’s own guidance suggests.
The big releases over there this week – which include jobs numbers, retail sales, and flash PMIs – will put all of that to the test. And then we have Fed officials saying that they’re making progress on getting inflation under control. However, they’re also still worried about the labour market – that’s all keeping rate expectations pretty fluid, and that’s stopping the dollar from getting much stronger.
GBP/USD Technical Picture: Consolidating with a Mild Upward Bias
From a more technical standpoint, GBP/USD is just consolidating near $1.3380 after that big early-month run. The recent price action is showing some pretty small candles with mixed wicks – that suggests the hesitation there rather than a whole lot of selling pressure. And to top it all off, the price is still holding above that rising trendline and the key averages, which keeps the general outlook pretty constructive:
- Support levels are $1.3360 (50-day EMA), then $1.3333 (100-day EMA)
- Resistance levels are $1.3435-$1.3470; if we do break through that, it could take us up into the high $1.35s
- Momentum indicators are just balanced – RSI is about 54, which is not overbought.
The Bottom Line: In the end, sterling’s direction will come down to what the Bank of England decides to do this week and what the data says. The dollar’s recovery is being held back by the uncertainty still surrounding Federal Reserve policy. At the same time, the GBP is receiving some technical support, suggesting the pair will trade in a relatively narrow range until policymakers provide more apparent signs.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save