Near 1.3300: British Pound eases ahead of UK budget and Fed rate decision

• 1.3300 is in focus as GBP/USD falls further in Wednesday’s Asian trading.
• Against a backdrop of higher global borrowing costs, the UK Finance Minister presents his first budget on Wednesday.
• An unchanged policy interest rate is the likely outcome of the Fed’s October meeting.

GBP/USD slips further towards 1.3300. During Wednesday’s Asian session, the British Pound (GBP) weakens against the US Dollar (USD) as caution prevails ahead of the UK Budget and the Federal Reserve (Fed) interest rate decision, both due on Wednesday.

With his first budget due later in the day, UK Finance Minister John Healey faces growing pressure to help households with living costs and support businesses. High government borrowing costs constrain his room for manoeuvre, as do the substantial tax increases introduced by his predecessor, Rachel Reeves.

Guillermo Felices, PGIM's global investment strategist, said: "It's hard to be immune in an environment where global bond yields are going higher, but among major developed markets, the UK is looking like one of the cleanest dirty shirts out there,"

An unchanged target range of 3.75% to 4.0% is widely anticipated from the Fed, alongside guidance on the probability of a December move. For further insight into the US interest rate outlook, traders will scrutinise Fed Chair Kevin Warsh’s speech. Hawkish comments from Fed officials could strengthen the Greenback, putting pressure on GBP/USD.

According to the CME FedWatch tool, markets assign a nearly 92.8% probability to unchanged rates at the Fed’s October policy meeting. A December US rate increase carries an 84.4% probability.

1.3300 support in focus as UK budget caution weighs on GBP/USD

Scotiabank strategists attribute part of Sterling’s weakness to fiscal uncertainty, noting that “caution ahead of Wednesday’s UK budget accounts for some of the GBP’s softness against the USD,” while “overnight GBPUSD vols… firmer, reflecting caution ahead of Chancellor Healey’s set-piece delivery tomorrow.” Their assessment is that “a budget that maintains fiscal credibility will likely be GBP-neutral at worst.” On the charts, the bank’s “neutral/bearish” view reflects its observation that “the GBP retains a soft undertone versus the USD, driving spot below minor support at 1.3350/55.” In Scotiabank’s analysis, this “leaves the October 19th low at 1.3300 exposed and lifts the risk of the pound easing back to the 1.3250/75 range to retrace a little more of its mid-month rebound,” though it anticipates that “modest GBP losses should entice support from bargain-hunters.”

7.4/10 for Greene as stalled wage disinflation tempers GBP rate-cut hopes

At 7.4/10, BoE’s Greene matches the historical average on FXS Speechtracker. Her focus on stalled wage disinflation and increased risks of second-round effects nevertheless gives the remarks a marginally hawkish bias. Wage disinflation has, in her assessment, stalled above levels compatible with 2% inflation. Coupled with an economy displaying “surprising resilience” and labour market slack that may already have peaked, this argues against an imminent easing cycle and supports GBP against other currencies.

Although forward-looking figures suggest pay growth nearer 3.5%, Greene’s call to “proactively lean” against second-round inflation risks effectively gives less weight to the reassurance offered by moderating wage indicators. For currency markets, economic resilience combined with persistent wage pressures suggests the Bank of England will cut rates more slowly than some peers. That would constrain GBP’s downside and leave rate differentials providing modest support.

Technical Analysis: 100-day SMA caps GBP/USD as bearish bias persists

Trading below its 100-day simple moving average (SMA), GBP/USD retains a mildly bearish broader outlook on the daily chart, despite recovering modestly from recent lows. Consolidation just above the 20-day Bollinger SMA points to underlying demand nearby. Meanwhile, a Relative Strength Index (14) reading around 47, below the 50 threshold, indicates that upside momentum remains unconvincing.

The 100-day SMA around 1.3390 provides the first upside hurdle. Beyond that, the upper Bollinger Band near 1.3415 offers another barrier where sellers may regain control if the advance continues. The mid-Bollinger band around 1.3285 provides immediate downside support, ahead of a stronger floor at the lower Bollinger Band near 1.3150. A breach of that lower level would likely strengthen the existing bearish bias.

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