FX.co ★ Der | GBP/USD

The British pound rose against the US dollar (GBP/USD) at the start of European trading on Monday, approaching the 1.3385 level. This gain was bolstered by the Bank of England’s decision to raise interest rates, which provided fundamental support for the pound against the dollar. The Bank of England opted to increase its key interest rate by 25 basis points to 4.00%—the first such hike in over three years. Bank of England Governor Andrew Bailey emphasized that the ongoing geopolitical conflict in the Middle East and its upward pressure on energy prices are key factors influencing future interest rate decisions. Bailey noted that while the market reaction following the US midterm elections led to a decline in oil prices, this did not alter the Monetary Policy Committee’s decision at the time; however, he acknowledged that lower energy costs would indeed factor into future monetary policy assessments. In addition to the rate hike, the Bank of England raised its economic growth forecasts for this year and next to 1.6% and 1.3%, respectively—projections that are more optimistic than those of the Office for Budget Responsibility. Analysts at ABN AMRO point out that the 25-basis-point increase has brought the Bank of England’s benchmark interest rate into alignment with the upper bound of the US Federal Reserve’s target range, which stands at 3.75% to 4.00%. The decision received strong support within the committee, with eight members voting in favor of a 25-basis-point interest rate hike, while one member advocated for a larger 50-basis-point increase—underscoring the committee’s continued hawkish stance. Furthermore, ABN AMRO noted that the Monetary Policy Committee expects inflation to reach approximately 5% by mid-2027; unless geopolitical unrest in the Middle East subsides, the possibility of further monetary tightening remains. However, subsequent commentary regarding monetary policy has introduced a degree of uncertainty concerning the medium-term trajectory of the British pound. Remarks by Huw Pill, Chief Economist at the Bank of England, were notably more cautious; according to the FXS Speechtracker, his "hawkishness" score stood at 4.2/10—below his historical average of 6.4/10. Pill emphasized that the interest rate path for the coming year remains uncertain, explicitly ruling out the possibility of pre-committing to a series of rate hikes starting in the spring. This conditional stance—which allows for the possibility that borrowing costs could remain unchanged or even decline should economic growth stagnate—highlights corporate profit margins and broader growth trends as key variables that will influence future monetary policy adjustments. As a result, financial markets have begun to lower their expectations regarding continued interest rate hikes, prompting investors to reassess previous speculative positions that had supported the British pound—a shift that introduces downside risks to the currency's outlook. From a technical perspective, the GBP/USD pair exhibits a limited, slightly bearish trend on the daily chart, currently trading below the 100-day simple moving average (SMA). Although the price remains in the upper half of the Bollinger Bands and the 20-day SMA provides solid support, overall momentum remains constrained. The 14-day Relative Strength Index (RSI) is hovering near the neutral level at 52.5, suggesting that the market is currently in a consolidation phase rather than a clear continuation of a trend. On the upside, initial technical resistance lies at the 100-day SMA (around 1.3395), with stronger structural resistance located at the upper Bollinger Band (around 1.3490). A decisive breakout above these levels could push the price toward the July 15 high of 1.3558. On the downside, immediate support is found at the middle Bollinger Band (around 1.3355), followed by the October 28 intraday low of 1.3272. A deeper pullback could lead to a retest of support near the lower Bollinger Band (around 1.3225).