- GBP/USD outlook tilts bearish as FOMC minutes reveal a hawkish stance.
- Budget constraints and BoE rate cut odds weigh on the pound.
- Markets await US NFP and UK PMI data to gauge economic strength and reposition accordingly.
The GBP/USD outlook remains under selling pressure during Thursday’s London session, dropping below 1.3050 before finding mild support. The easing of UK inflation has increased the odds of a rate cut in December by the Bank of England, while the US dollar remains firm after the release of FOMC minutes.
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The latest UK CPI report revealed that annual inflation declined to 3.6% in October, matching the forecast. However, the details reinforced the perspective of weakening domestic demand. Labor market conditions continue to cool, while GDP growth lags behind the BoE’s projection.
These dynamics have fueled speculation that the MPC could reduce the benchmark rates to 4% next month. According to Deutsche Bank, the policymakers seem confident enough to begin easing now.
In parallel, the pound sterling faces external pressure from resurging US dollar. The greenback gained ahead of key US data releases, while hawkish Fed meeting minutes led traders to scale back their expectations of another cut this year. The Dollar Index hovers near 5-month highs above the 100.00 mark, supported by the shift in the Fed’s probability of a rate cut in December dropping to 31%. Fed officials warned that further easing could reignite inflation, prompting the central bank to stay cautious.
The pound sentiment also weakened as global risk sentiment remains fragile ahead of the release of key US macroeconomic data. The markets are bracing for the September US NFP report today, leaving investors uncertain about the underlying strength of the US economy.
According to UOB analysts, the GBP could decline further to the 1.3000 area, but deeply oversold conditions could attract buying traction around the level. However, the pound is also contending with political and fiscal uncertainty as markets watch Rachel Reeves’s upcoming Autumn budget. Speculation grows that the government may extend the income tax threshold freeze. The outcome could unsettle gilt markets again.
GBP/USD Key Events Ahead
With BoE officials split ahead of December, key upcoming data, including UK Retail Sales and flash PMI figures, will be critical in shaping expectations. For now, GBP/USD remains vulnerable, with short-term corrective rallies likely to be sold into as the broader trend continues to favor the US Dollar.
GBP/USD Technical Outlook: Bears Taking Breather Under 1.3100
The GBP/USD 4-hour chart shows a corrective bounce from the key support of 1.3050, which could test the broken demand zone around 1.3090. However, the outlook remains fragile as the price stays well below key MAs. Meanwhile, the RSI remains around 40.0, indicating a rise from the oversold area but hinting at no bullish reversal.
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