Why is the British Pound struggling to build on gains ahead of the BoE’s policy decision?

• Selling pressure pulls the British Pound back from its intraday high of 1.3500 against the US Dollar before the BoE’s monetary policy announcement.
• A 25 bps interest rate increase to 4% is seen as a near certainty from the BoE.
• Democratic control of both the House and the Senate weighs broadly on the US Dollar.

Selling pressure is hampering the British Pound’s (GBP) bid to sustain gains beyond 1.3500 against the US Dollar (USD) on Thursday. Sterling is on the defensive as markets await the Bank of England’s (BoE) monetary policy decision at 12:00 GMT.

Will the BoE deliver its first rate hike since 2023 as Deutsche Bank expects?

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

A split over the likely voting pattern emerges in the previews. Deutsche Bank’s UK economists “expect there to be a 6-3 vote tally in favour of a hike.” By comparison, strategists at Brown Brothers Harriman (BBH) envisage a 7-2 split, with doves Alan Taylor and Swati Dhingra voting to keep rates unchanged.

As for the updated projections, Deutsche Bank believes “the big changes will come in the form of the BoE’s updated forecasts.” More specifically, 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 rebound in the US Dollar is also restraining gains in GBP/USD. During European trading, the US Dollar Index (DXY) has recouped most of its earlier losses and is trading marginally lower near 101.44. The index, which measures the Greenback against six major currencies, bounced after retesting the monthly low of 101.10 recorded the previous day.

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 intensified concerns about “gridlock on the debt ceiling, a prolonged government shutdown next year”.

GBP/USD Technical Analysis: Can the Bullish Bias Hold?

Holding above both the 20-day Exponential Moving Average (EMA) at 1.3370 and the 61.8% Fibonacci retracement at 1.3471, GBP/USD retains a bullish near-term bias on the daily chart while trading at 1.3482. Previously reclaimed Fibonacci support levels clustered between roughly 1.3470 and 1.3408 lend further strength to the positive outlook. At around 65, the Relative Strength Index (14) signals solid positive momentum, suggesting that upward pressure remains intact even as the indicator moves closer to overbought territory.

The first upside hurdle lies at 1.3561, the 78.6% Fibonacci retracement, followed by the 100% retracement and recent swing high near 1.3676. Support initially comes in at the 61.8% retracement of 1.3471, with the 50% level at 1.3408 and the 20-day EMA at 1.3370 next in line. A breach of these levels would bring the deeper Fibonacci supports at 1.3344 and 1.3266 into view, followed by the structural base around 1.3140.

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