Pound Strengthens to Highest Since October

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.

The British pound slipped to $1.322 on Friday but still gained about 1% for the week, its strongest rise since early August, after investors reacted to the government’s new budget.

Finance minister Rachel Reeves presented her long-awaited budget earlier in the week and defended it against criticism over higher spending and the decision to lift the tax burden to its highest level since World War Two.

The plan aims to raise £26 billion in new taxes to support welfare programs. Investors generally welcomed the budget’s signal of more disciplined borrowing, though the muted market response showed much of it was already priced in, and part of sterling’s rise likely came from traders unwinding hedges set before the announcement.

Looking ahead, the pound may face limited upside as its yield advantage fades and more Bank of England rate cuts loom.

The central bank kept rates unchanged in November, and easing inflation has strengthened expectations of a cut next month.

The British pound stabilized slightly higher near $1.3190 on Wednesday as markets assessed the government’s newly unveiled fiscal tightening plans and an unusually early release of the Office for Budget Responsibility’s forecasts.

Sterling initially strengthened after traders circulated the OBR document, but the move quickly reversed to as low as $1.31243 as investors examined details showing that much of the planned austerity is pushed toward the end of the decade.

The OBR noted a substantial increase in the government’s fiscal buffer to £22 billion, well above expectations, yet downgraded UK growth forecasts due to weaker productivity assumptions and projected higher inflation and wage pressures.

Analysts warned that the backloading of cuts could weigh on the government’s credibility, prompting the pound to trade erratically during Chancellor Rachel Reeves’s budget speech.

GBPUSD increased to 1.32, the highest since October 2025.

Over the past 4 weeks, British Pound US Dollar lost 0.89%, and in the last 12 months, it increased 4.24%.

The pound briefly climbed to $1.31929 before slipping to around $1.314 after the OBR accidentally released key budget figures ahead of Chancellor Rachel Reeves’s speech.

The report showed a larger-than-expected £22 billion fiscal buffer, compared with the £15 billion forecast, but also weaker growth and higher inflation projected for 2026.

The early release sparked sharp market swings, as such data normally appears only after the budget.

The OBR detailed tax changes including higher gambling duties, a levy on properties over £2 million, and a 2-point rise in dividend taxes, adding £26.1 billion in revenue by 2029-30.

Income tax and national insurance thresholds will remain frozen until 2030-31.

Confusion over the premature release, along with higher inflation forecasts, led traders to scale back rate-cut bets and left both gilts and sterling under pressure.

The OBR apologized, saying the link went live “too early” and that it has opened an investigation.

The British pound edged up to $1.318 as traders awaited Chancellor Rachel Reeves’s crucial budget.

She is expected to unveil a range of tax increases on the wealthy to plug a £20 billion fiscal gap, after weeks of political pressure from Labour MPs and turmoil around Keir Starmer’s leadership.

Reeves must balance demands from her party with the need to reassure gilt investors, who have been demanding a higher premium on UK debt.

Reeves is expected to create £15–20 billion in fiscal headroom, and markets will focus on whether her plan appears credible.

Recent data underline the challenge: borrowing is at a record high outside the pandemic, business activity has stalled, retail sales fell sharply, and consumer sentiment weakened.

Meanwhile, inflation eased to 3.6% in October, boosting expectations that the Bank of England will cut rates next month.

Markets now see an 80% chance of a 25-bp cut in December.