British Pound breaks 1.3350 as Warsh stays vague, BoE hike bets build
- GBP/USD surges 0.61%, clearing 1.3350 as Sterling bulls gain momentum.
- Warsh offers no rate guidance as October Fed hike odds fall to 15%.
- UK inflation data takes center stage as November BoE hike expectations strengthen.
The Pound Sterling advanced against the US Dollar on Friday after Fed Chair Kevin Warsh didn’t provide forward guidance on interest rates, while expectations that the Bank of England would hike rates in November supported GBP/USD, pushing it above 1.3350 and registering gains of over 0.61%.
GBP/USD rallies as Fed uncertainty contrasts with hawkish expectations on the BoE
The Fed Chair, Kevin Warsh, talked about the global economy, the boom of AI and yields. Regarding monetary policy, he said, “We made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago.”
Even though this week’s US inflation data supported an interest rate hike, investors seem skeptical and now expect a 15% chance of a 25-basis-point increase at the October meeting, according to Prime Terminal.
On the data front, Industrial Production increased in September, up 0.7% MoM, exceeding estimates of 0.4% and the prior month’s 0.1% expansion.
BoE expected to raise rates in November
In the UK, Bank of England Governor Andrew Bailey said that signs of second-round inflation are “quite subdued.” He was surprised about the economy, adding that it turned out “to be more resilient than we [BoE] expected to be.”
A Reuters survey showed that 54 of 63 economists expect the BoE to raise the Bank Rate by 25 basis points, “which coincides with the central bank's next set of quarterly forecasts.”
Regarding the Autumn Budget, a Bloomberg article reported that the UK’s Finance Minister, Healey, could increase taxes on banks.
Next week, the UK economic calendar will feature the release of Retail Sales, jobs and inflation data. In the US, housing data, Initial Jobless Claims and Flash PMIs are eyed by investors.
Given the backdrop, the GBP/USD path would be dictated by the UK’s inflation data. A hotter-than-expected read could prompt investors to increase their hawkish bets on the Bank of England, boosting the Pound, which so far remains below 1.3400.
GBP/USD Price Forecast: Technical outlook
In the daily chart, GBP/USD trades at 1.3340, holding a capped tone as the pair remains below the latest reading of the simple moving average cluster at 1.3418 and the descending trend-line resistance coming in near 1.3413. The additional upward-sloping support lines, now referenced at 1.3600 and 1.3789, sit well above spot and reinforce the notion of a broader corrective phase rather than a decisive bullish trend. The Relative Strength Index (14) at 53.34 has recovered into mildly positive territory, suggesting some stabilizing momentum, but this uptick is yet to challenge the dense overhead structure.
On the topside, immediate resistance is seen at the downtrend line around 1.3413, closely followed by the simple moving average barrier at 1.3418, which together form the first key supply zone. Further up, the former rising trend supports turned reference levels at 1.3600 and 1.3789 mark subsequent resistance bands that would need to be reclaimed to shift the broader bias. On the downside, initial support is provided by the prior descending trend-line break area around 1.3282, where a sustained hold would be needed to avoid a deeper slide toward lower psychological levels.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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