GBP/USD Rises as BoE Rate-Hike Expectations Support Sterling

Summary:

GBP/USD climbs towards 1.3430 as markets anticipate a BoE rate increase to 4.00%. Meanwhile, US election uncertainty weighs on the Dollar, although strong economic data and Fed tightening expectations continue to offer support.

Buy GBPUSD

EXP

Trading

1.34100

ENTRY

1.36000

TGT

1.33000

1.34258 +0.00205 +0.15%

Point

Flat

1.33000

CLOSING

1.34100

ENTRY

1.36000

TGT

GBP/USD is trading higher near 1.3430 at the start of the week, gaining around 0.3% as investors position ahead of Thursday’s Bank of England policy announcement. Sterling is drawing support from expectations of another interest rate increase, while the US Dollar remains under pressure ahead of Tuesday’s midterm elections.

ING analysts describe the Pound as relatively resilient, arguing that elevated energy costs leave the BoE with little room to delay further tightening. The bank considers a 25-basis-point increase to 4.00% on Thursday almost certain. However, attention is likely to extend beyond the rate decision itself, with investors examining the voting split and policymakers’ guidance for clues about whether additional increases could follow. A divided committee or cautious forward guidance could temper Sterling’s gains even if the expected hike is delivered.

The Dollar, meanwhile, is struggling to regain momentum. The US Dollar Index has slipped approximately 0.3% towards 101.65, with political uncertainty surrounding the upcoming midterm elections adding to selling pressure. ING’s Chris Turner identifies the election as a major event risk for currency markets, noting that betting markets have assigned a 70–72% probability to Democrats securing control of both chambers of Congress. Turner argues that such an outcome could introduce further uncertainty around debt-ceiling negotiations, government funding and the direction of US foreign policy, potentially weighing on the Greenback.

Nevertheless, the Dollar’s outlook is not entirely negative. Strong US economic growth, persistent inflation and expectations of further Federal Reserve tightening continue to provide underlying support. This creates competing forces for the currency: political uncertainty may limit demand in the near term, while the economic and monetary policy backdrop could prevent a deeper decline. For GBP/USD, the immediate focus remains on Thursday’s BoE decision and whether its policy guidance can justify Sterling’s recent strength.

Technical Analysis

GBP/USD is showing a notable improvement in its H4 structure after recovering from the 1.3280–1.3300 support region. The rebound has been relatively strong, with buyers pushing the pair back towards the 1.3400 area and challenging a resistance zone around 1.3390–1.3420. This recovery has shifted the short-term momentum in favour of buyers, particularly as price has moved back above a level that previously acted as a barrier.

The immediate focus is whether GBP/USD can establish sustained support above the 1.3390–1.3420 region. A successful breakout and hold above this zone would strengthen the bullish structure and potentially open the way towards 1.3470, followed by the 1.3540 area. The recent pullback from the resistance zone suggests some profit-taking, but the price action has not yet invalidated the recovery. A move back below 1.3350, however, would weaken the immediate bullish outlook and bring the 1.3280 support region back into focus.

The projected technical path favours another upward leg if buyers defend the breakout area and convert it into support. Beyond 1.3540, the next significant upside objective sits around 1.3600–1.3620. The key condition is that GBP/USD must avoid slipping decisively back below the 1.3390 region; otherwise, the latest breakout attempt could turn into a false move.

TRADE RECOMMENDATION

BUY GBP/USD

ENTRY PRICE: 1.3410

STOP LOSS: 1.3300

TAKE PROFIT: 1.3600

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

Rank

Articless

3200

Win Rate

63.82%

P/L Ratio

0.73

Focus on

XAUUSD, GBPUSD, EURUSD

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