Pound Rises as Markets Await BoE & React to US Shift

Key Moments

Election Outcome Pressures Dollar, Supports Pound

The British Pound advanced against the U.S. Dollar, with GBP/USD trading close to 1.3485 during Asian hours on Thursday. The move came as the U.S. Dollar weakened in response to a strong showing by Democrats in the U.S. midterm elections.

Democrats secured solid majorities in both the Senate and the House of Representatives in Tuesday’s midterm vote. The decisive outcome reduced worries about disputed results and weighed on the Greenback, giving the Pound additional support.

Market participants were focused on the upcoming decision from the Bank of England (BoE), scheduled for later on Thursday, as a key catalyst for the next leg in GBP/USD.

BoE Policy Expectations and Rate Outlook

Investors anticipated that the BoE would raise interest rates for the first time in three years, increasing the Bank Rate to 4.0% from 3.75%. The move would mark the first adjustment since August 2023, and traders were preparing for potential volatility around the decision and subsequent communication.

Attention was set to turn to BoE Governor Andrew Bailey’s press conference, as markets sought signals on the likely path of UK interest rates beyond the immediate move.

According to the article, financial markets were pricing in at least an additional three-quarter-point rate increase for the following year, on top of the expected hike this month. That profile would imply UK interest rates surpassing those anticipated for the U.S.

“I think they will have pushed through with a hike,” said Hetal Mehta, chief economist at wealth managers St James’s Place. “A pickup in energy prices a couple of months ago and more recent signs of resilient economic growth are likely to have tipped the balance on the MPC,” Hetal added.

Societe Generale: Short Covering and Technical Breakout in GBP/USD

Analysts at Societe Generale pointed to a notable technical improvement in the Pound, as GBP/USD extended gains and cleared the 200-day moving average (200dma). They observed that the pair had accelerated to a 7-week high above that key level, representing a gain of +2.7% since mid-October.

The bank attributed part of the move to the unwinding of previously built-up short positions ahead of the prior month’s UK Budget. It suggested that additional upside could be possible if past patterns hold, which would, in its view, assist the BoE in its efforts to curb inflation.

Societe Generale highlighted that “Cable traded a “GBP/USD: 1.3408 – 1.3484 overnight range,” with “Cable in the clear above 200dma, up to 7-week high on US election and short covering,” and now sees “support 1.3390, resistance 1.3535.” In the options market, it drew attention to GBP/USD strikes at “1.3365 (£630m), 1.3450 (£570m),” and in EUR/GBP options at “0.8330 (€1.5bn), 0.8365-75 (€3.8bn).”

Rates Market: UK Swaps and Gilt Auction

On the interest-rate side, Societe Generale reported that UK 10-year interest rate swaps (IRS) were “10y IRS -3bp to 4.797%, inside yesterday’s range,” noting nearby technical levels with “support 4.71%, resistance 4.93%.”

The bank reiterated its view that the ongoing strength in GBP/USD, with “sustained appreciation in cable (+2.7% from mid-October low) will help to contain inflation.” It also noted that the “Green 2037 gilt auction yesterday [was] well received: b/c 3.38x, small tail of 0.3bp.”

Fed Communication: Logan Signals More Tightening

On the U.S. policy front, remarks from Fed’s Logan were described as notably hawkish. The speech registered an 8/10 score on the FXS Speechtracker, compared with a historical average of 7.7/10, indicating a stance firmer than the recent norm.

The message emphasized that the Fed “needs at least two more quarter-point rate hikes” and that skipping a meeting does not change the intended policy destination. Logan also stressed that it is “unacceptable” that inflation is not yet on a trajectory toward 2%, indicating a willingness to maintain policy in modestly restrictive territory amid strong growth and only gradually tightening financial conditions.

The focus on a gradual approach and clarity on the ultimate peak in rates signaled a preference for a higher-for-longer setting, which was seen as supportive for the Dollar if markets had been positioned for an earlier pause.

The FXS Fed Sentiment Index increased by 0.95 points to 143.62. This reading, well above the neutral level of 100, was interpreted as confirmation that the broader policy environment remained firmly hawkish. Combined with the elevated Speechtracker score, the configuration was viewed as typically favorable for the Dollar versus lower-yielding currencies.

Technical Picture: GBP/USD Holds Bullish Bias Above 100-Day SMA

From a technical standpoint on the daily chart, GBP/USD was described as maintaining a constructive short-term setup. The pair was trading above the 100-day simple moving average (SMA) and the middle line of the Bollinger Bands, indicating a supportive trend backdrop.

Price action was situated in the upper half of the Bollinger envelope, while the 14-day Relative Strength Index (RSI) stood at 65.3, reflecting strong positive momentum edging toward overbought territory. This configuration suggested ongoing upside pressure, though with the possibility that bullish momentum could begin to fade.

On the upside, a clear break above the Bollinger upper band near 1.3505 was seen as opening room for further gains. On the downside, the 100-day SMA at 1.3390 was identified as initial support, followed by the middle Bollinger band near 1.3345. The lower band around 1.3185 was highlighted as a more distant bearish objective if the current advance were to unwind more sharply.