The Pound Sterling faced mild selling pressure on Friday despite the Bank of England (BoE) favoring a more gradual rate-cut path. Both the Fed and the BoE had cut interest rates by 25 basis points (bps) on Thursday. The Fed is expected to cut its key borrowing rates by 25 bps again in December. The Pound Sterling traded lower against the US Dollar below the psychological resistance of 1.3000 in Friday’s North American session, while the US Dollar Index traded in a tight range near 104.50.
The US Dollar rebounded after a sharp correction on Thursday, retracing almost 60% of Wednesday’s rally. The Dollar had rallied in October and early November as traders priced in Donald Trump’s victory in the US presidential election and Powell’s slightly dovish commentary. The Federal Reserve’s interest rate cut signified confidence in the continuation of the policy-easing cycle and an intact disinflation trend towards the 2% target.
Jerome Powell did not speculate on the near-term effects of Trump’s victory on the interest rate path but hinted at an inflationary impact due to promised import tariffs and lower corporate taxes. The likelihood of a 25 bps interest rate cut in the December meeting is at 71.3%. Investors awaited fresh interest rate guidance from Fed Governor Michelle Bowman on Friday. The BoE Governor Andrew Bailey’s less dovish commentary on interest rates offered cautious support for the Pound Sterling amidst uncertainty surrounding Trump’s trade policy.
Bailey emphasized a gradual rate-cut path based on economic developments and inflationary risks. The impact of UK’s Autumn Forecast Statement on interest rates was deemed similar by Bailey, who also pointed to fiscal measures boosting growth. While remaining vigilant to Trump’s trade policy decisions, investors will focus on UK employment data for the latest quarter, to be published on Tuesday. The British Pound showed strength against the Australian Dollar in percentage changes against major currencies on Friday.
Technical analysis showed the Pound Sterling trading near the breakdown region of a Rising Channel pattern against the US Dollar, just below 1.3000. Despite rebounding from an 11-week low near 1.2830, the GBP/USD pair remains supported by the 200-day Exponential Moving Average (EMA). The 20-day and 50-day EMAs are declining, indicating a bearish trend, with the 14-day Relative Strength Index hovering near 40.00. A break below the 1.2800 support level could signal further bearish momentum for Pound Sterling, while the psychological resistance at 1.3000 remains a key level to watch.
