Above 1.3350: British Pound edges up despite robust US jobs data

1.3370 is in sight as GBP/USD ticks up in early Asian trading on Monday.
Three further BoE rate increases are priced into markets.
165,000 US jobs were added in October, with NFP growth far exceeding forecasts.

GBP/USD advances towards 1.3370. The pair breaks a two-day run of losses in Monday’s early Asian trading as the British Pound (GBP) benefits against the US Dollar (USD) from a more hawkish-than-expected Bank of England (BoE) policy stance.

A 25 basis point (bps) increase last week took the BoE’s benchmark interest rate to 4.00%, its first rise in over three years. Governor Andrew Bailey identified the Middle East war and its upward pressure on energy prices as the principal consideration for future rate decisions. By the end of next year, markets anticipate three additional increases, exceeding the expectations of most economists.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

The drop in oil prices as markets responded to the US midterms would not have altered today’s decision, Bailey said. He nevertheless acknowledged that it "obviously" affects his outlook.

Further USD losses might be contained by the stronger-than-expected US Nonfarm Payrolls (NFP) report. Figures released on Friday by the US Bureau of Labor Statistics (BLS) showed 165,000 jobs added in October, up from 60,000 in September and above the market forecast of 65,000. The Unemployment Rate also declined, reaching 4.1% in October from September’s 4.2%.

According to the CME FedWatch tool, the market-implied probability of a December Fed rate increase is now nearly 79.6%. Before the US employment report, it stood at 72.8%.

2027 inflation risks in focus as BoE hike brings rate into line with Fed

For ABN Amro analysts, the BoE’s latest decision represents a further step in monetary tightening. They note that it "raised the bank rate by 25 bps to 4.00%, matching the upper bound of the 3.75-4.00% Fed Funds Rate range." Support across the committee was strong: "eight members" favoured the rise, while "one preferred a 50-bps increase," highlighting the MPC’s continuing hawkish inclination. ABN Amro also stresses that the committee "projected inflation to reach around 5% by mid-2027 and signalled another increase unless the Middle East conflict is resolved," indicating that persistent geopolitical risks remain central to the BoE’s policy assessment.

2026 rate flexibility remains on table for BoE’s Pill

At 4.2/10, the FXS Speechtracker score is substantially below Pill’s historical baseline of 6.4/10, indicating a markedly more dovish and uncertain tone. His emphasis on the absence of any firm commitment for next year’s interest rates, or a predetermined upward trajectory from spring onwards, marks a clear retreat from a tightening bias in favour of data-dependent decisions.

This more cautious approach is reinforced by the suggestion that Bank Rate could remain unchanged or even decline if growth stalls. The decisive issue would be pressure on company margins and how businesses respond. For GBP, greater uncertainty alongside explicit willingness to cut rates if growth weakens is modestly negative. It points to less currency support than Pill’s customary position.

Technical Analysis: 100-day SMA keeps GBP/USD outlook bearish

Trading just below the 100-day simple moving average (SMA), GBP/USD remains constrained on the daily chart. Its position slightly above the 20-day Bollinger middle band points to underlying demand nearby. However, the close overhead presence of the 100-day SMA limits upside potential. A broadly neutral Relative Strength Index (RSI) reading of 51.1 suggests momentum remains insufficient to test the existing resistance structure.

The 20-day Bollinger middle band, near 1.3355, provides the first support level. Should selling intensify, the lower Bollinger band around 1.3225 offers a further cushion. Resistance initially stands at the 100-day SMA of 1.3395, ahead of the 20-day Bollinger upper band near 1.3485. A recovery above that higher barrier would be needed to turn the near-term outlook more bullish.

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

Pound Sterling: key questions

Pound Sterling: which currency does GBP represent?

Dating back to 886 AD, the Pound Sterling (GBP) is the world’s oldest currency and serves as the United Kingdom’s official currency. According to 2022 figures, it ranks fourth globally in foreign exchange (FX) trading, representing 12% of transactions and average daily turnover of $630 billion. Among its principal pairs, GBP/USD, known as ‘Cable’, represents 11% of FX trading. GBP/JPY, called the ‘Dragon’ by traders, accounts for 3%, while EUR/GBP represents 2%. Responsibility for issuing the Pound Sterling rests with the Bank of England (BoE).

Bank of England decisions: how do they affect Sterling?

Monetary policy set by the Bank of England is the leading influence on the Pound Sterling’s value. Decisions depend on progress towards its main objective of “price stability”, meaning steady inflation of around 2%. Adjusting interest rates is its principal means of achieving that goal. To curb excessive inflation, the BoE raises rates, increasing borrowing costs for households and businesses. GBP generally benefits because higher interest rates make the UK more appealing to international investors seeking a home for their funds. Inflation that falls too low signals a slowdown in economic growth. The BoE will then consider rate cuts to reduce credit costs, encouraging companies to borrow more for investment in projects that generate growth.

Economic indicators: what drives the Pound’s response?

By revealing the economy’s condition, data releases can affect Sterling’s value. GDP, Manufacturing and Services PMIs, and employment figures are among the indicators capable of shaping GBP’s direction. Economic strength supports Sterling by attracting additional overseas investment. It may also prompt the BoE to raise interest rates, directly strengthening GBP. Conversely, weak economic figures are likely to weigh on the Pound Sterling.

Trade Balance: why does it matter for the Pound?

The Trade Balance is another important release for Sterling. Over a specified period, it tracks the gap between a country’s export earnings and its spending on imports. Strong overseas demand for a country’s exports creates additional demand for its currency as foreign buyers purchase those goods. A positive net Trade Balance therefore supports the currency, while a negative balance has the opposite effect.