British Pound challenges six-week highs as traders prepare for BoE tightening

• A third successive day of gains takes GBP/USD to six-week highs around 1.3420.
• Following the UK's 2026 budget, gilt yields fell as the Pound's recovery gathered pace.
• Expectations of a BoE rate rise next week lend further support to the GBP.

The reassuring UK budget delivered earlier this week has helped the British Pound (GBP) advance against the US Dollar (USD) for a third successive day on Friday. Attention is now turning to a widely anticipated interest rate rise from the Bank of England next week. At the time of writing, GBP/USD is testing six-week highs near 1.3420 and is set to record a third week of gains.

October's UK Nationwide Housing Prices were unchanged, Friday's figures showed, outperforming forecasts for a 0.2% fall. The reading followed a 0.3% decline in September.

Pound extends gains as UK budget reassures markets

A neutral UK budget continues to buoy Sterling traders after concerns surrounding the fiscal statement, against a backdrop of high public debt and bond market turmoil. For now, at least, the budget appears to have reassured markets. Since its release on Wednesday, the UK 10-year bond yield has fallen by nearly 10 basis points, giving the Pound renewed support.

Next week's monetary policy decision from the Bank of England has become the focus for investors. With recent economic releases pointing to continued UK growth and inflation still well above the bank's target, markets have almost fully priced in a 25-basis-point rate rise next week.

For the USD, ING analysts highlight risks surrounding the US midterm elections. They note that “A Democratic sweep is trading around 68% in prediction markets,” an outcome which, in their view, “could be seen as slightly negative for the US dollar from a few angles,” including “higher risk of government shutdown and gridlock on debt ceiling negotiations” and “potential damage to already shaky AI-related sentiment.” Given these risks, ING says it “would be cautious in chasing the USD upside in the next few days.”