The GBP/USD pair has seen a moderate recovery, moving away from its lowest levels since mid-August as it climbs back above the 1.2900 mark during the Asian trading session. This upward momentum follows some cautious repositioning by traders ahead of critical policy announcements from the Bank of England (BoE) and the U.S. Federal Reserve (Fed), both scheduled for later today.
The BoE is expected to cut interest rates for the second time this year amid a cooling inflation trend. However, hopes that UK Finance Minister Rachel Reeves’ first budget may reignite inflationary pressures are lending some support to the British Pound (GBP). Meanwhile, the U.S. Dollar (USD) has seen a slight pullback from recent four-month highs, providing a further boost to GBP/USD.
BoE Rate Decision: Key Driver for GBP/USD
The Bank of England’s upcoming rate decision is widely anticipated, with markets expecting a potential cut from the current 5% to 4.75%. This dovish shift aligns with the BoE’s goal of addressing slowing inflation, although potential fiscal policies in Reeves’ budget could complicate the bank’s stance, potentially slowing the pace of rate cuts.
Fed Meeting and the “Trump Trade” Impact on USD
Simultaneously, the USD outlook remains influenced by the ongoing Federal Open Market Committee (FOMC) meeting. Fed Chair Jerome Powell’s post-meeting comments will be closely watched as markets seek insight into future interest rate moves. Under Donald Trump’s second presidency, there’s optimism about higher growth and inflation, which may temper the Fed’s pace in reducing rates.
The USD’s strength has also been bolstered by U.S. Treasury bond yields, which remain elevated near multi-month peaks as investors return to the so-called “Trump trade.” This could act as a limiting factor for GBP/USD gains, making it essential for bullish traders to wait for additional confirmation of a near-term bottom before placing new bets.
Also read : Pound Sterling Plummets To 11-Week Low Amid Trump’s Rise In Polls – GBP/USD Hits 1.2850
Technical Outlook: GBP/USD’s Support and Resistance Levels
From a technical perspective, GBP/USD is currently trading near 1.2900. Immediate resistance lies at this level, while support remains at the 200-day Simple Moving Average (SMA) near 1.2830. A sustained move above 1.2900 would be required to confirm a bullish reversal, while a breakdown below the 200-day SMA could indicate further downside risks.
