The GBP/USD pair fluctuated within a narrow band near 1.3524 USD on Thursday, with price action limited as market participants anticipate crucial US inflation figures and significant policy discussions from the Federal Reserve and the Bank of England in the upcoming week.
The pound has successfully rebounded from a sell-off that occurred earlier in September, driven by worries regarding the sustainability of UK fiscal policies, which caused the currency to hit monthly lows and led long-term government bond yields to reach levels not observed since the late 1990s. Sterling finds its backing in investor anticipation that the Bank of England will avoid drastic rate cuts, particularly as other significant central banks, such as the Fed, shift towards easing measures. Another supportive factor is the UK’s elevated inflation, which continues to be the highest among G7 nations, characterized by particularly persistent price growth in services and wages.
Recent data suggest that the economy is demonstrating resilience in the face of ongoing inflationary pressures and a weakening labor market. In this scenario, Chancellor Rachel Reeves is under increasing pressure to uphold fiscal stability while adhering to the government’s borrowing regulations. The forthcoming budget statement in November will attract significant attention. GBP/USD is experiencing a corrective decline from the recent peak around 1.3584 USD. The pair could potentially continue this trajectory towards the support level near 1.3420 USD. Upon completion of the correction, a rebound from this level may trigger a new upward movement, with initial resistance identified at 1.3548 USD, succeeded by a retest of 1.3584 USD. Indicator reinforces this perspective: while the histogram and signal line continue to stay above zero, both are on a downward trajectory, indicating a short-term bearish momentum amid a larger consolidation phase.
GBP/USD is experiencing a measured trading approach as market participants prepare for the upcoming central bank decisions next week. The pound continues to find support from relatively hawkish Bank of England expectations and elevated inflation levels. However, its short-term trajectory is expected to be influenced by the Federal Reserve’s stance and forthcoming fiscal developments in the UK. The pair is currently experiencing a short-term correction, potentially offering buying opportunities should key support levels remain intact.