GBP/USD is experiencing slight declines, hovering near 1.3240 during the early European session on Thursday. Stronger US PMI has intensified expectations for a Federal Reserve rate increase. Financial markets are presently assigning a probability of 67% to the likelihood of a rate hike by the Bank of England in November. The GBP/USD pair records slight increases around 1.3240 in the early hours of European trading on Thursday. However, the potential upside for the major pair might be constrained due to an expanding policy divergence between a hawkish Federal Reserve and a more cautious Bank of England. According to the US S&P Global Flash Purchasing Managers Index, released on Wednesday, the Composite PMI exhibited an increase to 58.4 in September, up from 56.0 in August. Meanwhile, the Manufacturing PMI increased to 57.0 in September, up from 53.9 in the prior reading. This figure exceeded the forecast of 53.5.
Federal Reserve Governor Michael Barr stated on Wednesday that “further policy adjustments are likely to be needed” to manage inflation effectively. Earlier this week, Fed President Tom Barkin and Boston Fed President Susan Collins both endorsed the recent interest rate increase, referencing ongoing inflationary pressures. Stronger-than-expected US PMI data and hawkish remarks from Fed officials may bolster the Greenback and serve as a headwind for the major pair in the near term. Bank of America Global Research projects that the Bank of England will implement two interest rate hikes in the upcoming six months, driven by the upward pressure on energy prices, which heightens the risk of sustained inflation. Meanwhile, the OECD stated on Wednesday that the UK central bank does not need to increase interest rates, as the current policy in the UK is sufficiently stringent to maintain inflation control.
Markets are currently reflecting a 67% probability of a Bank of England rate hike in November, with an additional increase anticipated in December, as indicated by LSEG data. Strategists highlight growing risks around the market’s aggressive Bank of England pricing, noting that “the swaps curve continues to imply about 100bps of BoE rate hikes in the next twelve months to 4.75%.” In their view, “the BoE may not need to tighten as much as markets expect,” given that “the UK economy is already operating below capacity,” the “Bank Rate at 3.75% is near the top of the BoE’s estimated 2% to 4% neutral range,” and “fiscal policy will likely turn more restrictive.” Together, these factors suggest scope for a dovish repricing that could leave the Pound vulnerable. In the daily chart, GBP/USD maintains a bearish outlook as the spot remains below all significant reference levels. The latest 20-period Bollinger Bands indicate that price is positioned below the lower limit of the Bollinger band.
Meanwhile, the middle Bollinger band and the 100-day simple moving average further support a downside bias, as the pair is trading significantly beneath these structural markers. The Relative Strength Index at 25.44 indicates that it is in oversold territory, suggesting that although selling pressure remains prevalent, the rate of decline may start to ease. On the topside, immediate resistance emerges at the lower limit of the Bollinger band near 1.3258, which now serves as the initial obstacle for any corrective bounce. Above that, the 100-day SMA at 1.3428 and the Bollinger middle band at 1.3455 create a significant resistance cluster that must be overcome to alleviate the prevailing bearish pressure, while the upper boundary of the Bollinger band, positioned at 1.3652, represents a more remote obstacle. On the downside, the initial support level is situated at the June 24 low of 1.3140, followed by the November 20, 2025 level of 1.3038. Any follow-through selling beneath this threshold may reveal the 1.3000 psychological level.
