Above 1.3450: British Pound inches up ahead of BoE rate decision

• 1.3485 is the level GBP/USD approaches as it rises in Thursday’s Asian session.
• Control of the Senate and House of Representatives passes to Democrats following the US midterm elections.
• 4% is the Bank Rate expected from the BoE, up from 3.75% in its first increase since August 2023.

GBP/USD advances towards 1.3485. During Thursday’s Asian trading, the US Dollar (USD) slips against the British Pound (GBP) after the Democrats’ overwhelming US midterm election victory. Attention now turns to the Bank of England (BoE) interest rate decision due later on Thursday.

Tuesday’s midterm elections handed Democrats substantial majorities in both the Senate and House of Representatives. With concerns over disputed results easing, the Greenback has come under pressure.

A rise in the Bank Rate from 3.75% to 4.0% is widely anticipated on Thursday, marking the BoE’s first increase in three years. For further indications of the UK interest rate outlook, traders will scrutinise the press conference held by BoE Governor Andrew Bailey.

Beyond an increase this month, financial markets are pricing in at least a three-quarter-point rate rise next year. That would put UK interest rates above the levels projected for the US.

Hetal Mehta, chief economist at wealth managers St James's Place, said: "I think they will have pushed through with a hike," adding: “A pickup in energy prices a couple of months ago and more recent signs of resilient economic growth are likely to have tipped the balance on the MPC,”

200dma Cleared: GBP/USD Gains Support BoE Inflation Efforts

For Societe Generale analysts, the recent GBP/USD move reflects the unwinding of bearish positions: “the acceleration to a 7-week high above the 200dma (+2.7% since mid-October) demonstrates how the accumulation of short positions before the Budget last month are now being unwound.” Looking ahead, they say “further gains could lie ahead if history is any guide, helping the BoE in its battle to contain inflation.” The bank describes trading as a “GBP/USD: 1.3408 - 1.3484 overnight range,” and characterises the move as “Cable in the clear above 200dma, up to 7-week high on US election and short covering,” with levels now at “support 1.3390, resistance 1.3535.” Its options commentary identifies GBP/USD strikes at “1.3365 (£630m), 1.3450 (£570m),” and EUR/GBP strikes at “0.8330 (€1.5bn), 0.8365-75 (€3.8bn).”

Turning to UK rates, Societe Generale records “10y IRS -3bp to 4.797%, inside yesterday’s range,” and identifies “support 4.71%, resistance 4.93%.” The bank again stresses that “sustained appreciation in cable (+2.7% from mid-October low) will help to contain inflation,” while describing the gilt sale as follows: “Green 2037 gilt auction yesterday [was] well received: b/c 3.38x, small tail of 0.3bp.”

At Least Two More Hikes: Logan’s Message Supports Dollar Bulls

An 8/10 FXS Speechtracker reading put Fed’s Logan modestly above the 7.7/10 historical average, reflecting a clearly hawkish message and a firmer position than the established baseline. Logan’s insistence that the Fed “needs at least two more quarter-point rate hikes” was accompanied by the argument that skipping a meeting would not change the ultimate policy destination. Coupled with the view that it is “unacceptable” inflation is not on track to 2%, the remarks indicate a clear commitment to moving policy into modestly restrictive territory, despite strong growth and financial conditions tightening only gradually. The focus on measured steps and a clearly defined end-point points to a preference for higher rates for longer. That should support the Dollar, particularly if markets had been anticipating an earlier pause.

A 0.95-point increase took the FXS Fed Sentiment Index to 143.62, leaving the broader policy backdrop firmly hawkish and well above the neutral 100 threshold. Together with the high FXS Speechtracker reading, the rise indicates that Fed messaging still favours further tightening. Such a backdrop typically supports the Dollar against currencies with lower yields.

100-Day SMA Holds: GBP/USD Technical Outlook Remains Bullish

Above both the 100-day simple moving average (SMA) and the Bollinger middle band, GBP/USD retains a bullish short-term bias on the daily chart. The pair is testing the upper half of the Bollinger envelope. At 65.3, the Relative Strength Index (14) indicates solid positive momentum approaching overbought territory. Upward pressure therefore remains in place, though it may soon lose strength.

A decisive break above the immediate resistance at the Bollinger upper band, near 1.3505, would create scope for additional gains. Initial downside support sits at the 100-day SMA of 1.3390, ahead of the Bollinger middle band around 1.3345. If the advance reverses more sharply, the lower band near 1.3185 provides a more distant bearish target.

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