British Pound gains prove difficult to extend as BoE policy decision approaches

• 1.3500 marks the British Pound’s intraday high against the US Dollar before a pullback ahead of the BoE’s monetary policy decision.
• A 25 bps interest rate rise to 4% is considered almost certain from the BoE.
• With US Democrats securing control of both the House and the Senate, the US Dollar faces broad selling pressure.

1.3500 is proving difficult for the British Pound (GBP) to clear against the US Dollar (USD) on Thursday. Sterling’s attempt to extend its rally faces pressure before the Bank of England’s (BoE) monetary policy announcement at 12:00 GMT.

25 bps BoE hike in focus as Deutsche Bank expects first increase since 2023

Among today’s key scheduled events, Deutsche Bank analysts highlight the BoE announcement at “12:00 London time”. They describe the central bank as “widely expected to deliver their first-rate hike since 2023, with a 25bp move that takes their policy rate up to 4%.”

A 6-3 split is the forecast from Deutsche Bank’s UK economists, who “expect there to be a 6-3 vote tally in favour of a hike.” By contrast, Brown Brothers Harriman (BBH) strategists anticipate a 7-2 vote, with dovish policymakers Alan Taylor and Swati Dhingra backing unchanged rates.

The most significant changes, Deutsche Bank added, are likely to be in the BoE’s revised forecasts. Its economists expect that “the Bank will show peak CPI nearer 4.25% in Q1 2027, although they also expect an upgrade to the 2026 growth forecast to 1.4%.”

A modest US Dollar rebound is also restraining gains in GBP/USD. During European trading, the US Dollar Index (DXY) has recouped most of its earlier losses, leaving it slightly lower near 101.44. The index, which tracks the Greenback against six major currencies, bounced after retesting the previous day’s monthly low of 101.10.

Political turbulence in the United States (US) is expected to keep the US Dollar under pressure. According to ING, the Democrats’ midterm election victory has heightened concerns over “gridlock on the debt ceiling, a prolonged government shutdown next year”.

1.3482 GBP/USD: Technical Outlook

At 1.3482 on the daily chart, GBP/USD retains a bullish near-term outlook. The pair remains above both the 20-day Exponential Moving Average (EMA) at 1.3370 and the 61.8% Fibonacci retracement at 1.3471. Previously reclaimed Fibonacci support levels clustered between roughly 1.3470 and 1.3408 underpin the positive picture. Around 65, the Relative Strength Index (14) signals solid upward momentum, suggesting buying pressure continues even as the indicator approaches overbought territory.

The first upside hurdle is the 78.6% Fibonacci retracement at 1.3561. Beyond that lies the 100% retracement, coinciding with the recent swing high near 1.3676. Support starts at the 61.8% retracement of 1.3471, followed by the 50% retracement at 1.3408 and the 20-day EMA at 1.3370. A breach of these levels would bring lower Fibonacci supports at 1.3344 and 1.3266 into view, before the structural base around 1.3140.

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