The British Pound is back on the defensive this Wednesday, sliding below 1.3150 as traders start to price in a rate cut from the Bank of England (BoE) in December.
The pair has been under pressure for two straight days now, with investors reacting more to policy expectations than fresh data.
Basically, the market’s saying: “We think the BoE blinks first.”
Let’s break it down.
Here’s What You Need to Know
1. Traders Expect the BoE to Cut Rates Soon
GBP/USD dropped toward 1.3140 as bets grew for a 25-basis-point cut to 3.75% next month. Major institutions like Morgan Stanley, Citigroup, and UBS now expect the BoE to ease, that’s a big shift in sentiment.
2. BoE Policymaker Signals Inflation Worries, Not Relief
Megan Greene from the BoE said she’s not convinced policy is restrictive enough yet. That means inflation still worries them, even as markets expect a cut. It’s a messy message, traders are reading between the lines.
3. U.S. Dollar Finds Support from Washington News
The dollar got a small boost after the U.S. Senate passed a bill to reopen the government. That move cleared the way for fresh data releases, and risk sentiment improved slightly. But remember, the greenback’s strength here is more about stability than momentum.
4. Soft U.S. Jobs Data Still Points to Fed Easing
ADP employment data showed slower job growth, private employers cut more jobs, feeding rate-cut bets on the U.S. side too. The CME FedWatch Tool now prices in a 63% chance of a Fed cut in December. So both the Fed and BoE are moving in the same dovish direction.
My Takeaway
GBP/USD is sitting in a tug-of-war between two softening central banks. The BoE looks ready to cut, but the Fed isn’t exactly hawkish either.
For us traders, this isn’t the time to chase moves, it’s the time to watch how GBP reacts near 1.3010, the key support zone on the chart.
If it holds, we might see a bounce. If it breaks, momentum could accelerate lower fast.
Either way, we stay patient and precise. The next move belongs to the BoE.