Are US jobs and Fed hawks keeping the British Pound muted despite a BoE hike?

• Rates reach 4% as BoE votes 8-1 in favour of an increase.
• Further tightening risks emerge as the UK inflation forecast rises to 4.4%.
• Gradual rate hikes find support among Fed officials as US jobless claims decline to 189K.

The Pound Sterling has given up its earlier advance against the US Dollar, with robust US data and hawkish remarks from Fed officials outweighing the Bank of England's (BoE) rate increase to 4%. Although the move narrowed the interest-rate gap with the Fed, the UK currency remained under pressure. GBP/USD is trading virtually unchanged at 1.3467.

Why has GBP/USD lost its gains despite BoE tightening as firm US data and hawkish Fed comments weigh?

An 8-to-1 vote at the BoE delivered an increase in the Bank Rate, while Catherine Mann backed a larger, 50-basis-point rise. Significantly, the central bank lifted its Q1 2027 inflation projection to 4.4% from July's forecast of 3.2%, pointing to further rate increases ahead. Even so, it finds little evidence that higher energy prices are producing second-round effects.

Another rate increase “may be warranted,” BoE Governor Bailey said during the press conference, while noting that progress in the Iran conflict could curb inflationary pressures. Rather than endorsing the view that only two rate hikes are necessary, he stressed that the outcome would depend on risks.

Further rate increases are envisaged by Monetary Policy Committee members Pill, Lombardelli and Greene, as well as, unsurprisingly, Mann.

Evidence of US labour-market resilience came from Initial Jobless Claims, which fell to 189K for the week ended 31 October from 195K, undershooting expectations of 196K. Separately, Challenger, Grey and Christmas reported that Challenger Job Cuts increased to 43.994K in October from 43.281K, a rise of just 2% over September. Although layoffs edged higher, employers unveiled plans last month to recruit 444.692K workers, marking a 57% increase from a year earlier.

Comments from Fed officials also drew attention. A gradual pace of rate increases is Cleveland Fed President Beth Hammack's preference, though she said the Fed still has more work to do. Richmond Fed President Thomas Barkin similarly favoured a gradual approach, warning that “broad-based” inflation is still too high.

Against this backdrop, expectations of additional BoE rate increases have left GBP/USD subdued rather than driving it higher. Firm US employment figures and the Fed's hawkish tone continue to restrict the upside, while investors weigh the Democratic sweep in the US midterm elections.

With no UK releases on the calendar ahead, attention turns to the US Nonfarm Payrolls report.

GBP/USD Price Forecast: Can the bullish technical bias hold?

A positive near-term bias remains intact on the daily chart, where GBP/USD is trading at 1.3476. Buying interest on declines is evident as spot holds above both the latest simple moving average cluster around 1.3366 and rising trend-line support near 1.3360, drawn from the 1.3140 base. Momentum supports this view: the 14-period Relative Strength Index is around 64, indicating healthy buying pressure that has not yet reached an extreme. Meanwhile, the FXS Fed Sentiment Index is settling near 144, suggesting that broader headwinds stemming from the USD remain contained for now.

The first upside hurdle lies around 1.3508, at the latest reaction high on the descending resistance trend line. Beyond that, the next downward-sloping resistance line near 1.3544 presents a stronger barrier. The higher rising-trend reference at 1.3606, drawn from the 1.3159 support sequence, adds to the broader overhead supply zone. Immediate downside support comes from the nearby moving-average floor and lower ascending trend line, which converge around 1.3366–1.3360. A breach of this area would undermine the bullish bias and open the way for a deeper correction towards earlier swing levels on the daily chart.

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