British Pound steadies above 1.3250 as traders await UK GDP data
- GBP/USD flatlines near 1.3275 in Thursday’s early Asian session.
- BoE’s Greene says it is appropriate to proactively tighten our monetary policy stance.
- Traders have boosted bets on a 25 bps Fed rate hike in December to 87.3%.
The GBP/USD pair holds steady around 1.3275 during the early Asian session on Thursday. Traders continue to assess the monetary policy path from the Bank of England (BoE) and the US Federal Reserve (Fed). The preliminary reading of UK Gross Domestic Product (GDP) for the third quarter (Q3) will be released later on Thursday.
BoE policymaker Megan Greene said on Wednesday that it was appropriate to "proactively tighten our monetary policy stance" to ward against the risk of wage growth getting stuck at higher levels and firms passing those costs on. Hawkish comments from Greene could provide some support to the Cable against the USD in the near term.
On the US front, traders raise their bets on a Fed rate hike in December following hotter than expected US Consumer Price Index (CPI) inflation data. Fed Governor Christopher Waller said earlier this week that he would support a quarter-point rate increase in December and might push for a half-point move if inflation data is worse than expected.
Markets are now pricing in nearly an 87.3% chance of a Fed rate increase in the December policy meeting, while the probability of a 50 bps hike stands at 12.7%, according to the CME FedWatch Tool.
"We've got broad-based strength in the dollar largely underpinned by a hawkish shift in Fed fund rate expectations driven by the hot October CPI print but amplified as well by recent comments by Fed officials," said Elias Haddad, global head of markets strategy at Brown Brothers Harriman & Co.
UK rates steady as markets eye Bailey speech and global data slate
Strategists at Societe Generale note that UK rates are starting the week on a stable footing, with the "10y IRS opens unchanged at 4.70% after holding 4.69% (100dma) last week." They highlight nearby technical levels, citing "support 4.58%, resistance 4.78%," and point out that Governor Bailey "speaks in Zurich later today, first intervention since the MPC rate increase week," a key event for Sterling and UK rates traders.
Looking ahead, Societe Generale flags a busy global data calendar, with the "week ahead: US CPI, PPI, Fed speak incl Waller and Williams. EU 3Q GDP second read. UK prel 3Q GDP. China trade balance. CPI for Mexico, Norway, Czech Republic, Hungary, India." In the UK specifically, they focus on Thursday’s growth release, where "prel 3Q GDP" is due and SG "forecast 0.7% qoq," providing an important gauge of domestic momentum following the recent MPC decision.
Greene flags proactive tightening as UK wage risks rise
BoE's Greene delivers a strongly hawkish signal, with a 9.4/10 FXS Speechtracker score notably above the historic 7.7/10 baseline. The emphasis on “proactively tighten our monetary policy stance” marks a clear shift toward tighter policy guidance.
The remark that UK wage growth is “too high” and that labor market slack is smaller than previously thought reinforces the case for earlier and more forceful action. This combination of persistent wage pressures and reduced slack supports a stronger Pound bias as markets price in a higher probability of additional BoE tightening.
Technical Analysis: GBP/USD maintains a bearish bias below the 100-day SMA
In the daily chart, GBP/USD keeps a bearish near-term bias as spot holds beneath the 100-day simple moving average (SMA) and the Bollinger middle band. The pair is consolidating in the lower half of the recent Bollinger envelope, with the lower band offering nearby demand, while the Relative Strength Index (14) at 43 suggests subdued, mildly negative momentum rather than oversold conditions.
On the topside, initial resistance is clustered around the Bollinger middle band at 1.3370, followed by the 100-day SMA at 1.3400, with a stronger cap emerging at the Bollinger upper band near 1.3475. On the downside, immediate support is seen at the Bollinger lower band at 1.3260; a decisive break beneath this floor would open the way for a deeper slide, while sustained trading above it would keep the pair in a range, albeit still pressured by overhead moving-average resistance.
(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.
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