The Pound Sterling (GBP) staged an impressive recovery against the US Dollar (USD), as GBP/USD clinched fresh monthly highs above the 1.3250 psychological level.
Pound Sterling capitalized on the UK Budget relief
Amidst increased odds of interest rate cuts by the Bank of England (BoE), GBP/USD found its feet, thanks to the UK Autumn Budget and growing expectations surrounding a US Federal Reserve (Fed) December rate reduction.
The CME Group’s FedWatch Tool showed an 85% chance of the Fed lowering rates next month against a 40% probability seen a week ago. Dovish commentary from Fed officials and mixed US data ramped up odds for such a move by the central bank.
New York Fed President John Williams said on November 21 that “US interest rates could fall without putting the Fed’s inflation goal at risk, while helping guard against a slide in the job market,” per Reuters.
Earlier in the week, Fed Governor Christopher Waller also favored a rate cut before the end of the year and expressed concerns about a “still fragile” labor market.
San Francisco Fed President Mary Daly also noted that “the Fed shouldn’t hold off on cutting rates now out of fear it may need to reverse course later.”
Later in the week, the Pound Sterling recovery gained traction due to the UK Budget announcement, which eased pressures surrounding fiscal concerns and bolstered GBP/USD.
Citing analysts, Reuters reported, “fears about slow growth, weak productivity and sticky inflation are not reflective of an attractive investment backdrop.”
Chancellor of the Exchequer Rachel Reeves’ budget was well received by markets despite the Office for Budget Responsibility (OBR) downward revision of the economic growth for 2025.
However, the pair’s upswing remained restricted because of the details of the Budget, entailing back-loaded tax measures.
Week ahead: US data to dominate
The week kicks off with the US ISM Manufacturing PMI on Monday.
Next of note for markets remains the monthly ADP Employment Change report on Wednesday, followed by the US ISM Services PMI release.
On Thursday, the weekly Unemployment Claims will be reported ahead of the release of the Fed’s preferred inflation measure, the Personal Consumption Expenditures Price Index, on Friday.
Besides the economic data, speeches from BoE policymakers and updates on the US-Ukraine discussions on the potential peace deal will also be closely followed.
GBP/USD Technical Analysis
The 20-day Simple Moving Average (SMA) has started to turn higher but remains below the 50- and 100-day SMAs. The 50- and 100-day SMAs extend their decline, while the 200-day SMA rises; price stays below the 50-, 100- and 200-day SMAs but above the 20-day. The Relative Strength Index (14) prints at 53 (neutral), signaling modest momentum recovery. Measured from the 1.3675 high to the 1.3011 low, the 38.2% retracement at 1.3264 acts as near-term resistance, with the 50% at 1.3343 above.
Bias remains uneven, with improving short-term momentum yet persistent overhead hurdles. The 20-day SMA currently stands at 1.3142 and offers nearby support, while the 200-day SMA at 1.3313 acts as dynamic resistance; the 50- and 100-day SMAs continue to slope lower. RSI holding above 50 would increase the odds of an upside extension, while a pullback would expose the 20-day SMA as the first line of defense.
(The technical analysis of this story was written with the help of an AI tool)
