– Written by


Frank Davies

STORY LINK Pound-to-Euro Week Ahead Forecast: GBP Supported by BoE, Closer EU Ties

The Pound to Euro exchange rate (GBP/EUR) held close to 1.20 after the Bank of England raised interest rates to 4.00% and warned that further tightening may be needed.

Goldman Sachs sees scope for Sterling to advance towards 1.2050 in the short term, although investment banks remain divided over how far UK rates will rise and whether the Pound can sustain its gains into 2027.

GBP/EUR Forecasts: BoE Takes Action

Goldman Sachs sees scope for the Pound to Euro (GBP/EUR) exchange rate to edge higher to 1.2050 in the short term and has revised its 12-month forecast higher to 1.1630 from 1.1360 previously.

MUFG forecasts a retreat to 1.15 by the third quarter of next year.

GBP/EUR tested the 1.20 level during the week before a limited retreat to 1.1980 as overall Pound sentiment held firm in global markets. Overall volatility was contained despite sharp moves in energy prices and equities.

ING commented on the short-term Pound outlook; “EUR/GBP has overshot rate differentials down at these low 0.83 levels, but there seems to be no reason to expect an upside correction just yet.” (Waiting for a GBP/EUR retreat.)

The Bank of England (BoE) increased interest rates by 25 basis points to 4.00%, in line with strong expectations. The bank warned that a further increase was likely unless energy prices declined.

Investment banks continued to debate the outlook for future hikes. MUFG commented; “Our base case remains one further hike in February, the next projection meeting, completing a moderate and gradual tightening cycle.”

It added; “That said, today’s broadly hawkish tone does shift the balance of risks. A December move and a terminal rate of 4.5% are both more plausible now. The energy backdrop will remain the key swing factor for the former, while more concrete evidence of second-round effects would be needed, we think, for a higher terminal rate.”

Danske Bank noted; “We change our call and add two further 25bp hikes in February and April, taking Bank Rate to 4.50%, unless a lasting resolution to the conflict is reached.”

UK and Euro-Zone fiscal policy will also be a key underlying element.

According to Rabobank; “A reduction in the [UK] fiscal headroom is not good news, but crucially this is a self-imposed discipline. Compared with some other G7 countries, and most notably France, at least the UK has a budget consolidation plan in place.”

It added; “The UK’s fiscal position is far from enviable, but at least it has an improving primary deficit which should provide some reassurance for GBP markets.”

The government is continuing to push towards closer ties with the Euro area which could have an important impact on medium-term Pound sentiment.

Goldman Sachs commented; “The prospects for EU reintegration have continued to garner market focus – and unwinding even a fraction of our estimated 6% cumulative impact of Brexit on Sterling would imply a significant boost to the currency, but the path to achieving these outcomes is highly uncertain and gradual.”

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Resistance, where sellers may return, starts at 102.259, then 102.488. Support, where buyers may step in, stands at 101.891, followed by 101.704.

RSI, a gauge of buying and selling strength, remains above 50 but has crossed beneath its signal line, a slower average of RSI. My bias is neutral while DXY holds above support at 101.891. A two-hour close above 102.259 and the trendline would favour renewed upside; below 101.891 would turn the immediate bias bearish.

GBP/USD Technical Analysis: Trendline Bounce Reclaims 1.3373 Pivot

The GBPJPY pair formed several bearish waves, affected by forming a strong barrier at 213.50, reaching below 212.00 level in Friday’s trading, announcing the dominance of the bearish scenario by targeting 211.15 level.

Providing negative momentum by the main indicators and holding below 213.50 level repeatedly supports the dominance of the bearish trend, to expect attempt to target 210.40 level, where surpassing it will make the next main target for the negative trading at 209.10 level.

The expected trading range for today is between 210.40 and 212.35

Trend forecast: Bearish

The EURJPY pair surrender to the stability of 178.10 barrier, to cancel the chance of activating the bullish trend, to begin forming bearish waves by holding near the extra support level at 176.30.

Providing negative momentum by the main indicators makes us wait for breaking the additional support and providing a negative close below it to confirm its readiness to form strong bearish waves that might push it to reach 175.60, to press at 174.95 once again, while breaching 178.10 level and holding above for at least four hours will confirm its readiness to form strong bullish waves in the near period.

The expected trading range for today is between 175.60 and 177.35

Trend forecast: Bearish

– Written by


Frank Davies

STORY LINK Pound to Dollar Forecast: GBP/USD Stalls at 1.35 Despite Hawkish BoE

The Pound to Dollar exchange rate (GBP/USD) struggled to break above 1.3500 on Thursday despite a hawkish Bank of England rate hike and continued fallout from the Democrats’ sweeping US midterm election victory.

Pound Sterling remained firm near seven-week highs, but a modest Dollar recovery and expectations of further Federal Reserve tightening limited gains ahead of Friday’s US employment report.

GBP/USD Forecasts: Blocked at 1.35

The Pound to Dollar (GBP/USD) exchange rate briefly re-tested 7-week highs at 1.3500 on Thursday before a retreat to near 1.3460.

The Pound held firm after the Bank of England (BoE) rate decision with the currency index close to 10-year highs while the dollar recovered some ground after posting sharp losses in immediate reaction to the Democrats gaining control of both Houses of Congress.

UoB now sees the potential for GBP/USD gains to 1.3530.

Scotiabank is more cautious on the near-term view; “Two rejections of the 1.35 area over the past 24 hours sets up a minor double top on the intraday chart. The GBP could ease back to the low 1.34 area on a break under the “neckline” trigger at 1.3455.”

It did add; “Broader trends still look bullish, however, and moderate weakness is likely to draw interest from momentum traders and trend followers.”

The BoE increased rates by 25 basis points to 4.00%, in line with consensus forecasts and the first increase for three years. There was an 8-1 vote as Mann voted for a larger 50 basis-point hike.

The bank warned that the risk of second-round inflation effects had increased and expects inflation will reach 5% early next year. It also warned that further rate hikes were likely unless there was a retreat in energy prices, although Governor Bailey did add that a series of hikes was not inevitable.

Markets are pricing in a 50% chance of a further move in December and three further hikes over the next 12 months.

ING commented; “we expect one further rate hike by February. A renewed spike in energy prices could bring that forward to December. However, we’re still sceptical that the Bank will need to hike more than once more.”

Schroders UK Chief Economist David Rees added; “we think UK interest rates will peak at 4.25%.”

The dollar outlook will also be a key element as markets ponder the seismic US political shift.

According to ING; “Poorer US data and/or a more dovish Fed remain the necessary conditions for front-end USD rates to fall more than peers, and by extension for a broader USD downturn.”

It added; Instead, data has remained broadly supportive of Fed tightening expectations.”

MUFG commented; “Leading indicators of labour demand are signalling strengthening US employment growth which if confirmed on Friday could help to provide some support for the US dollar after the recent setback.

Consensus forecasts are for an increase in non-farm payrolls of around 65,000 following the 29,000 increase for September with the unemployment rate expected to hold at 4.2%.

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Bank of Japan Governor Kazuo Ueda said that higher energy costs were starting to feed into consumer prices. The wage data and comments from Ueda strengthened the case for rate hike from 1.25% to 1.5% in December.

US Dollar Index Forecast as Treasury Yields Rise

The US dollar index surged higher after the release of US jobs data. The index gained nearly 0.31% for the week and closed the week at 102.28. This positive reversal produced constructive weekly candle on the chart.

The two-year Treasury yield increased from 4.46% to 4.52% as the market increased expectations for Fed hike. The rebound in Treasury yields supported positive movement in the US dollar index. Therefore, the index can remain strong over the next few days as Treasury yields continue to rebound.

From a technical perspective, the US dollar index has rebounded from the low of 95.55 in January 2026. The index surged higher to reach a high of 102.945 in October 2026 and remains positive after breaking above resistance at 100.50. This suggests continued positive movement in the US dollar index and the market is expected to buy on any dips.