GBP/USD struggles around a 6-week low ahead of the BoE rate decision

GBP/USD has fallen to a six-week low, with a stronger dollar following the hawkish Fed hike, as attention turns to the Bank of England’s interest rate decision at 12:00 BST today.

The central bank is expected to leave interest rates unchanged at 3.75%, where they have been since December last year.

The decision comes as inflation has risen to 3.1%, but service sector inflation and underlying inflation remained unchanged in August. The labour market is weakening, which is also helping to offset some of the inflationary pressures stemming from the Middle East conflict.

The question is how long the Bank of England will be able to maintain this stance, given that oil and gas prices are rising sharply and are now above the adverse scenario set out by the central bank in July.

Therefore, officials are expected to set the stage for a hike in November, which could be the first of several.

The vote is expected to be 3-6-3 in favour of holding, the same as in July. A more hawkish vote could help to support the pound.

The meeting comes after the Federal Reserve hiked rates by 25 basis points and adopted a hawkish stance at its meeting yesterday, lifting the U.S. dollar to a six-week high.

The 25-basis-point hike to 3.75%-4.00% was forecast. The dot plot points to at least one more rate hike this year.

GBP/USD forecast – technical analysis

GBP/USD broke down below the ascending channel, taking out the 200 EMA and falling to 1.3380. This, combined with the RSI below 50, keeps sellers hopeful of further downside.

Attention will turn to 1.3340, the horizontal support, and 1.3270, the July low. A break below here opens the door to the 1.3200 support zone.

On the upside, immediate resistance is seen at the 200 EMA at 1.3430, with a rise above here exposing the 50 EMA at 1.3490. Should buyers rise above 1.3500, this would create a higher high towards 1.3650.

USD/JPY in focus after a hawkish Fed hike ahead of the BoJ meeting

USD/JPY jumped to a two-week high above 156.00 on Wednesday, before easing back slightly to 158.0 at the time of writing.

The jump came following the Federal Reserve’s hawkish hike, lifting the U.S. dollar to a six-week high.

The Federal Reserve raised interest rates by 25 basis points as expected, and delivered its first hike since 2023. However, policymakers also lifted their inflation and growth forecasts, while the dot plot pointed to more hikes this year.

Sixteen of 18 policymakers supported at least one more rate hike this year, with four of those supporting two more rate hikes.

This has prompted markets to price in three additional hikes by the middle of next year.

Attention is now turning to the Bank of Japan, and the hawkish Fed position threatens to keep the U.S.-Japan rate gap wide, even as the Bank of Japan is expected to hike rates as well this week.

The yen weakened by around 1% overnight in the wake of the Fed move. This reversal comes after a sharp rally earlier this month, fuelled by expectations of intervention, faster BoJ monetary policy tightening and the unwinding of some yen-funded carry trades.

For the yen to remain supported, the BoJ will not only need to hike rates but also deliver a hawkish message in order to limit the damage to the currency. Failure to do so, and a disappointment from the BoJ, could see the 160 level come back into focus.

A 25-basis-point rate hike is almost fully priced in, meaning that the focus is firmly on BoJ Governor Ueda’s post-decision conference for clues over the pace of additional tightening.

Should the yen weaken back towards the 160 level, it could put intervention risk back on the table.

USD/JPY forecast – technical analysis

USD/JPY’s recovery from the 153.00 low has run into resistance at the 156.30 level. The price still trades below its 50, 100 and 200 EMAs in a bearish picture.

Buyers would need to extend the recovery above the 200 EMA at 157.80 and the 50 EMA at 158.20 to put the price on a firmer footing. From here, attention would turn to the 160 resistance zone.

Support is seen at 155.40, with a break below here opening the door to 154.65 before attention would turn back towards 153.00.

Traders also had a chance to take a look at the Initial Jobless Claims report. The report indicated that 196,000 Americans filed for unemployment benefits in a week, compared to analyst forecast of 208,000. The job market stays strong, which is bullish for the American currency.

In case U.S. Dollar Index stays above the psychologically important 100.00 level, it will head towards the nearest resistance, which is located in the 100.50 – 100.65 range. On the support side, a move below the 99.85 level will open the way to the test of the support at 99.25 – 99.40.

There is no change to the pair’s bearish path, as it continues to post repeated negative closes below the 210.40 barrier. The price is currently showing temporary sideways trading around 208.80, affected by conflicting signals from the main indicators, particularly as the Stochastic indicator approaches the 80 level.

We will continue to wait for the price to gather negative momentum during the upcoming trading sessions, which would enable it to form new bearish waves targeting the 208.10 level. A break below this level would confirm the next bearish target at 206.85.

The expected trading range for today is between 208.10 and 209.60

Trend forecast: Bearish

The pair has maintained its bearish stance, once again posting a negative close below the key 180.80 barrier. The price is currently fluctuating sideways near 179.00 as it attempts to counter the intraday positive momentum from the Stochastic indicator, increasing the chances of gathering fresh bearish momentum.

We expect that once the price successfully gathers bearish momentum, it will begin targeting the downside levels, initially moving toward 177.90, before attempting to reach further bearish targets at 177.35 and 176.70.

The expected trading range for today is between 177.90 and 179.65.

Trend forecast: Bearish

– Written by


David Woodsmith

STORY LINK Pound-to-Dollar News, Forecast: GBP/USD Holds Near Lows after Hawkish Fed Hike

The Pound US Dollar (GBP/USD) exchange rate remained close to recent lows on Wednesday evening after the Federal Reserve raised interest rates by 25 basis points.

At the time of writing, GBP/USD was trading at around $1.3470, leaving the pairing little changed overall from earlier in the session.

US Dollar (USD) Supported as Fed Signals Further Tightening

The US Dollar (USD) held firm on Wednesday after the Federal Reserve raised its benchmark interest rate to 3.75%-4.00%.

The decision was unanimous and marked the Fed’s first interest rate increase since 2023.

With the 25-basis-point hike already heavily priced in, attention centred on the central bank’s updated projections and accompanying guidance for clues over the future path of US monetary policy.

Policymakers signalled that another quarter-point increase remains likely before the end of the year, while Fed Chair Kevin Warsh stressed that inflation remains too high and that underlying price trends have not improved sufficiently.

Persistent inflationary pressures, elevated oil prices and relatively resilient economic data have strengthened expectations that the Fed could continue tightening monetary policy.

Warsh nevertheless continued to avoid firm forward guidance, leaving future decisions dependent on incoming inflation and labour-market data.

The relatively hawkish message helped the US Dollar retain support following the announcement.

The Pound (GBP) struggled to find a clear direction against its major counterparts on Wednesday following the release of the latest UK inflation figures.

Data from the Office for National Statistics (ONS) showed that annual headline inflation accelerated from 2.9% to 3.1% in August, matching market expectations.

The increase was largely driven by higher energy prices, which have risen sharply after briefly easing during July.

Despite this, there was limited evidence of broader inflationary pressure building elsewhere in the UK economy.

Core inflation remained unchanged at 2.6% in August, while services inflation also remained contained.

As a result, Sterling showed little reaction to the figures, with analysts suggesting the latest inflation reading is unlikely to materially alter expectations surrounding the Bank of England’s upcoming policy decision.

Near-Term GBP/USD Forecast: BoE Decision Now in Focus

Looking ahead to Thursday, attention will turn to the Bank of England’s latest interest rate announcement for the next major catalyst for the Pound to US Dollar exchange rate.

The BoE is widely expected to leave interest rates unchanged when policymakers announce their decision at midday.

With the rate decision largely anticipated, the vote split and accompanying guidance are likely to attract the most attention.

A cautious assessment of the economic outlook could weigh on Sterling if it signals limited appetite for further monetary tightening.

Conversely, stronger warnings over the inflationary impact of elevated energy prices could revive expectations for another BoE rate hike later this year and provide the Pound with some support.

Meanwhile, the latest US initial jobless claims figures could also influence the Dollar.

A renewed increase in unemployment claims may temper some of the support generated by the Fed’s hawkish policy message.

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