FX.co ★ Fixy | GBP/USD

The British pound traded sideways against the US dollar (GBP/USD) in early European trading session, with market participants generally adopting a cautious approach as they awaited a series of significant events that could impact the economy later this week. These key events include the upcoming US midterm congressional elections, the Bank of England's upcoming interest rate decision, and the publication of US non-farm payrolls data for September and related employment details. For GBP traders, central bank actions remain the focus; The market widely expects the Bank of England to raise its benchmark interest rate by 25 basis points, from 3.75% to 4.00%, at its meeting scheduled for Thursday in November. If the move materializes, it would be the first rate hike by the Bank of England since August 2023, amid persistent inflationary pressures that remain well above the central bank's 2% target. Analysts at ING noted that while the possibility of another rate hike in early 2027 remains, the money market currently appears to be overestimating the Bank of England's aggressive monetary tightening path. Therefore, traders will closely monitor the press conference of Bank of England Governor Andrew Bailey and the monetary policy update report, looking for policy guidance; If the central bank confirms continued inflation and takes a hawkish stance, this could give new upward momentum to the pound against the dollar. From a monetary policy perspective, foreign exchange strategists at Brown Brothers Harriman (BBH) contend that strong UK inflation data and solid economic activity provide strong support for a 25 basis point rate hike. They expect that the result of the vote within the Monetary Policy Committee will be 7 votes in favor and 2 votes against, with the two members known for their accommodative tendencies, Alan Taylor and Swati Dhingra, likely to vote in favor of keeping interest rates unchanged. However, BBH also warns that if the updated macroeconomic forecasts indicate that the economic slowdown will continue for some time, the currency market may lower its expectations on the rate hike path sharply, limiting the potential for sterling to rise. Recent statements by the Bank of England's monetary policy maker, Meghan Green, have reinforced this hawkish trend. According to FXStreet's Speechtracker, her public statements received a rating of 7.4 out of 10, showing a clear bias towards a tight monetary policy. Greene stressed her concerns about slowing wage inflation, noting that current wage growth remains above the 2% inflation target range; It cited wage growth expectations of nearly 3.5%, and stated that the labor market recession may have peaked. Its support for a proactive approach to the continuing risks of a “second wave” of inflation signals a strong reluctance to support rapid monetary easing, which reinforces its hawkish stance and provides structural support to sterling.

Technically, the daily chart of GBP/USD is still showing an uptrend, with the exchange rate trading firmly above the 100-period SMA (at 1.3385) and the middle Bollinger Band line (20-period SMA, at 1.3320). This technical pattern indicates that after the recent bounce from the lower limit of the trading range, the short-term trend is still leaning towards the upside. At the same time, the 14-day Relative Strength Index (RSI) is 57.9, which shows that the upward momentum is steadily strengthening and has not yet entered the overbought zone, indicating the possibility of further upside. On the upside, immediate technical resistance is located near the upper band of the Bollinger Band (around 1.3465); A decisive break above this resistance could take the price to the July 15 high of 1.3558, and even the August 21 high of 1.3675. On the downside, initial dynamic support is located at the 100-day moving average (around 1.3385), followed by the middle band of the Bollinger Band (1.3320). A clear break below these key technical support levels could lead to a test of the October 15 low at 1.3184. Further weakness will find support near the recent lower Bollinger Band area (around 1.3172).