UK demand concerns pressure Sterling

Pound Sterling Under Pressure Amid BoE Concerns Over Domestic Demand and Rate Outlook

On Friday, the Pound Sterling (GBP) weakened against most major currencies, falling to 1.3110 against the United States Dollar. The decline followed Thursday’s monetary policy announcement from the Bank of England (BoE), which kept interest rates unchanged at 4%. The decision was made with a narrow 5-4 vote within the Monetary Policy Committee (MPC).

Tight Decision at the Bank of England

In the latest vote, five MPC members supported maintaining the current rate, while four—including newly appointed Deputy Governor Sarah Breeden—advocated for a 25 basis point cut. This marked Breeden’s first dissenting vote, aligning her with dovish members such as Swati Dhingra, Dave Ramsden, and Alan Taylor.

The BoE’s official statement noted that “weak demand could weigh on inflation in the medium term,” and that “the risk of persistent inflation has recently become less pronounced.” Governor Andrew Bailey emphasized that the monetary policy path remains tilted toward easing, but added, “We need to see a more established downward path in inflation before cutting rates again.”

🇬🇧 UK Inflation and Rate Outlook

Signs that price pressures in the United Kingdom may have peaked have strengthened expectations for another rate cut later this year. Markets remain cautious, awaiting further clarity from the central bank.

🇺🇸 US Labor Data Impacting the Dollar

Across the Atlantic, the United States Dollar rebounded slightly on Friday after Thursday’s decline, with the DXY index rising from 99.60 to 99.80. A report from Challenger, Gray & Christmas revealed that 153,074 workers were laid off in October—the largest monthly reduction in over two decades. This figure was 183% higher than in September and 175% higher than October of the previous year.

The data has heightened concerns about the US labor market and increased the probability of a rate cut by the Federal Reserve in December to 67%. The ongoing federal government shutdown has amplified the impact of these figures on the dollar.

Technical Analysis: GBP/USD Remains Bearish

The GBP/USD pair trades near 1.3110 and remains below the 200-day Exponential Moving Average (EMA) at 1.3265. The 14-day Relative Strength Index (RSI) has rebounded slightly after dipping below the oversold threshold of 30, but overall momentum remains bearish.

If the downtrend continues, key support lies near the April low of 1.2700. On the upside, resistance is expected around the October 28 high of 1.3370.