British Pound Little Changed at $1.34

The British pound edged slightly lower to below $1.34 after fresh data showed the UK GDP unexpectedly contracted by 0.1% in October, marking the fourth consecutive month without growth and defying expectations for a 0.1% increase.

Despite the soft data, sterling remains near two-month highs and is on track for a 0.5% weekly gain, supported by broad dollar weakness after the Federal Reserve cut the fed funds rate by 25 bps as expected this month and signalled it still anticipates one more rate cut next year.

Looking ahead, the Bank of England meets next week, with investors assigning nearly a 90% probability of a 25 bps cut to 3.75%.

Such a move would mark the fourth rate reduction this year and bring borrowing costs to their lowest level since 2022.

Sterling stabilized around $1.33 following last week’s rally, remaining close to a six-week peak of $1.339 hit on Thursday, as investors paused to assess policy outlooks from both the Bank of England and the Federal Reserve.

Expectations for next week’s BoE rate decision have changed little, with roughly an 84% chance of a cut priced in, despite accelerating wage growth.

A Recruitment & Employment Confederation/KPMG survey showed starting pay for permanent staff rose at the fastest pace in five months, while hiring slowed and the pool of jobseekers expanded.

Markets are now nearly fully pricing a second 25bps cut by June, with about a 75% chance of it occurring in April.

In the US, the Federal Reserve is expected to deliver a 25-basis-point cut on Wednesday, though focus will remain on updated FOMC projections amid lingering uncertainty over the 2026 policy path.

EUR/USD

• 1.1800 (EUR 1.99 bn)
• 1.1650 (EUR 976.48 mn)
• 1.1575 (EUR 892.51 mn)

USD/JPY

• 156.00 (US$ 1.67 bn)
• 155.00 (US$ 1.73 bn)
• 153.00 (US$ 778.82 mn)

GBP/USD

• 1.3500 (GBP 500.00 mn)
• 1.3050 (GBP 740.00 mn)

USD/CHF

• 0.8020 (US$ 180.00 mn)
• 0.7975 (US$ 100.00 mn)

USD/CAD

• 1.3940 (US$ 1.12 bn)

AUD/USD

• 0.6665 (AUD 301.57 mn)
• 0.6595 (AUD 400.22 mn)
• 0.6475 (AUD 864.67 mn)

NZD/USD

• 0.5730 (NZD 926.14 mn)

EUR/GBP

• 0.8845 (EUR 200.11 mn)
• 0.8590 (EUR 175.00 mn)

Justin prepared a weekly overview before leaving for the holidays here. For more information on how to use this data, you may refer to this post here. This article was written by Giuseppe Dellamotta at investinglive.com.

The British pound extended its advance above $1.335, trading at its strongest level since October 22, as investors brace for an almost certain rate cut from the Federal Reserve, while upbeat UK PMI data and optimism around the budget have added support.

Markets are now pricing in roughly a 90% probability that the Fed will deliver a 25 bps cut on Wednesday, with expectations for another two to three reductions next year as recent data continues to signal a cooling labor market.

In the UK, the Bank of England is increasingly divided ahead of its December 18 meeting.

Four hawkish policymakers remain wary of persistent inflationary pressures, while more dovish members argue that the economy is slowing and the labor market is loosening.

Governor Bailey is expected to cast the deciding vote, and markets also assign nearly a 90% chance of a cut to 3.75%.

Adding to the outlook, the OECD this week projected that the BoE will cut rates twice more to 3.5% by June before pausing its easing cycle.

The British pound extended gains toward $1.33, reaching its strongest level since late October, as investors welcomed an upward revision to November’s UK services PMI while the US dollar softened ahead of an expected Fed rate cut next week.

The services PMI was revised up to 51.3 from 50.5, comfortably above the 50 threshold separating expansion from contraction, while the composite PMI rose to 51.2 from 50.5.

Despite the positive headline readings, business activity slowed and employment fell at the fastest pace since February, according to S&P Global, though prices charged inflation eased to its lowest level since January 2021.

Looking ahead, the Bank of England is widely expected to deliver a 25-basis-point rate cut in December, before pausing amid concerns over potential inflation re-acceleration.

Meanwhile, US markets fully price in a third Fed rate cut in December, with at least two more reductions anticipated next year, adding to the pound’s relative strength.

Fundamental Overview

The USD has been weakening across the board ever since Fed’s Williams endorsed a December rate cut. The greenback then extended the losses further last week following soft ADP data and a Bloomberg report saying that Hassett emerged as the frontrunner for the Fed Chair position.

The probability for a December cut is now at 87%, which makes it a done deal. We won’t get much data before the FOMC meeting, so the focus will likely be mainly on jobless claims and ADP data, which haven’t been showing any strong improvement.

Weak data should keep weighing on the greenback, while strong data could provide some short-term reprieve. At the end of the day though, it’s all about the FOMC decision now and the following NFP and CPI reports.

On the GBP side, the market sees a 90% probability of a rate cut this month and a total of 62 bps of easing by the end of 2026 following soft UK data. The Autumn Budget announcement was well received with the pound strengthening across the board, even though eventually it gave back the gains.

GBPUSD Technical Analysis – Daily Timeframe

GBPUSD daily

On the daily chart, we can see that GBPUSD couldn’t break above the resistance around the 1.3250 level and pulled back a bit. If the price gets there again, we can expect the sellers to step in with a defined risk above the resistance to position for a drop into the trendline. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 1.3370 level next.

GBPUSD Technical Analysis – 4 hour Timeframe

GBPUSD 4 hour

On the 4 hour chart, we can see that the price broke below the upward trendline, opening the door for a bigger pullback into the 1.3125 level. If the price gets there, we can expect the buyers to step in with a defined risk below the level to position for a rally into the 1.3250 resistance. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the trendline around the 1.3070 level.

GBPUSD Technical Analysis – 1 hour Timeframe

GBPUSD 1 hour

On the 1 hour chart, there’s not much else we can add here but given the more bearish short-term bias, the sellers might wait for the price to come into the recent swing high at 1.3220 to position for a drop into the 1.3125 level with a better risk to reward setup. The buyers, on the other hand, will look for a break higher to target a break above the 1.3250 resistance. The red lines define the average daily range for today.

Upcoming Catalysts

Tomorrow we have the US ADP and the US ISM Services PMI. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment report. This article was written by Giuseppe Dellamotta at investinglive.com.