GBP Slides Toward 1.3300 Ahead of UK Budget, Fed Call

Key Moments:

Macro Focus: UK Fiscal Plans and Fed Policy in the Spotlight

The GBP/USD pair continues to lose ground, trading near 1.3300 during Wednesday’s Asian session. The British Pound is under pressure against the US Dollar as market participants adopt a risk-averse stance ahead of the United Kingdom’s budget announcement and the Federal Reserve’s interest rate decision scheduled for later in the day.

UK Finance Minister John Healey is due to deliver his first budget, with investors watching for initiatives aimed at easing the cost-of-living strain on households and providing support to businesses. However, his room for maneuver is constrained by elevated government borrowing costs and the substantial tax hikes introduced by his predecessor, Rachel Reeves.

“It’s hard to be immune in an environment where global bond yields are going higher, but among major developed markets, the UK is looking like one of the cleanest dirty shirts out there,” said Guillermo Felices, PGIM’s global investment strategist.

Fed Expectations: Policy Pause Anticipated, December Signals in Focus

The Federal Reserve is broadly expected to leave its benchmark rate unchanged, maintaining the current target range of 3.75% to 4.0%, while providing guidance on the likelihood of any move at the December meeting. Traders are looking to remarks from Fed Chair Kevin Warsh for additional insight into the US rate trajectory. Any shift toward a more hawkish tone from Fed officials could bolster the US Dollar and weigh further on GBP/USD.

According to the CME FedWatch tool, market pricing currently reflects a 92.8% chance that the Fed will hold rates steady at its October meeting. The probability assigned to a rate increase in December stands at 84.4%.

Scotiabank View: Budget Caution and Technical Pressure on GBP/USD

Strategists at Scotiabank attribute part of the Pound’s weakness versus the Dollar to positioning ahead of the UK fiscal announcement, noting that “caution ahead of Wednesday’s UK budget accounts for some of the GBP’s softness against the USD,” with “overnight GBPUSD vols… firmer, reflecting caution ahead of Chancellor Healey’s set-piece delivery tomorrow.”

They argue that “a budget that maintains fiscal credibility will likely be GBP-neutral at worst.” From a chart perspective, Scotiabank characterizes the setup as “neutral/bearish,” emphasizing that “the GBP retains a soft undertone versus the USD, driving spot below minor support at 1.3350/55.” This, they say, “leaves the October 19th low at 1.3300 exposed and lifts the risk of the pound easing back to the 1.3250/75 range to retrace a little more of its mid-month rebound,” while also suggesting that “modest GBP losses should entice support from bargain-hunters.”

BoE Signals: Greene Highlights Wage Risks, Tempering Rate-Cut Bets

Discussion around UK rates has also been shaped by comments from Bank of England policymaker Greene. BoE’s Greene scores 7.4/10 on FXS Speechtracker, exactly in line with the historic average, but the emphasis on stalled wage disinflation and greater risk of second-round effects marks a hawkish tilt at the margin. Remarks that wage disinflation has stalled above levels consistent with 2% inflation, alongside an economy showing “surprising resilience” and labor market slack potentially having peaked, argue against an imminent easing cycle and support GBP on the crosses.

By stressing the need to “proactively lean” against second-round inflation risks even as forward-looking data point to pay growth closer to 3.5%, Greene effectively downplays the comfort from moderating wage indicators. For FX, this combination of resilience and sticky wage dynamics suggests the Bank of England will be slower to cut than some peers, limiting downside for GBP and keeping rate differentials a modest tailwind.

Technical Picture: GBP/USD Holds Below 100-Day SMA

On the daily timeframe, GBP/USD remains under the 100-day simple moving average, keeping the broader configuration mildly bearish despite a modest bounce from recent troughs. Price action is consolidating just above the 20-day Bollinger SMA, implying some nearby buying interest, while the 14-period Relative Strength Index hovers around 47, still under the 50 threshold and indicating that positive momentum is not yet firmly established.

Key technical reference points for GBP/USD are outlined below:

On the topside, the 100-day SMA near 1.3390 is the first notable resistance, followed by the upper Bollinger Band around 1.3415, an area where sellers may look to cap further gains if the pair extends higher. On the downside, initial support is cited at the mid-Bollinger band near 1.3285, with more meaningful protection at the lower Bollinger Band close to 1.3150. A decisive move below that level would likely confirm and deepen the existing bearish bias.