Pound-Dollar Gains Forecast to Stall Below JPMorgan’s Breakout Test Before BoE
JPMorgan’s desk grows more positive on Pound Sterling, but Friday’s close leaves a key breakout unconfirmed before the Bank of England’s next decision.
The Pound to Dollar exchange rate finished Friday at $1.3389, having touched $1.3433 earlier in the session, leaving JPMorgan’s latest bullish technical signal unconfirmed.
The bank’s FX trading desk had identified a meaningful close above the 200-day moving average, then at 1.3430, as a possible route towards resistance at 1.3560-1.3570.
Even so, the desk has become more positive on Pound Sterling following the UK Budget and a rally in US government bonds, giving the Bank of England’s 5 November decision a chance to test whether the recent recovery can develop further.
Its view is tactical and conditional, with no fixed date attached to the higher resistance area.
A better backdrop, but no confirmed breakout
JPMorgan’s sales and trading team sees the government’s handling of the Budget as one source of support:
“Budget moving into the rear-view mirror and with Healey and Burnham seemingly in tune (not in hock though…) with what would and would not upset financial markets, sterling has remained robust.”
The desk also links the advance to developments on the Dollar side:
“With this latest US tech wobble and rally in US fixed income cable has benefited handsomely to re-test the top of the 1.3150/1.34 range.”
A rise in Treasury prices means lower yields, which can reduce the income advantage of holding Dollars and help GBP/USD even when investors are becoming less comfortable with US equities.
JPMorgan also observed resilience against the Euro, suggesting the move was not entirely a reflection of Dollar weakness:
“Price action is pretty marked in EURGBP as well testing lower on the initial ECB statement but completely ignoring the resulting EUR squeeze that came later.”
The desk nevertheless cautioned that prices looked stretched and that month-end flows could complicate the picture.
Its technical assessment reads:
“In terms of the moving average cable cluster we are through the 50d (1.3381) and 100d (1.3388) just the 200d to go at 1.3430-a close could be meaningful, 1.3560/70 would be next resistance.”
The moving averages are Friday’s readings.
The next hike is easier to call than the ones after it
The BoE’s last decision left Bank Rate at 3.75%, with three of nine policymakers already favouring an increase.
The next announcement is due on Thursday, 5 November.
Crédit Agricole expects a hike, but Valentin Marinov, its head of G10 FX strategy, doubts that policymakers will endorse the extended tightening cycle investors have been anticipating.
“The MPC could remain noncommittal with respect to future hikes, however. This is partly because the latest UK economic resilience may not last, once the current period of buoyant AI investment comes to an end.”
Marinov’s concern extends beyond investment:
“High energy and growing borrowing costs coupled with fresh fiscal austerity measures as part of the Autumn Statement and next year’s March budget could hurt households’ real purchasing power and thus domestic demand, however.”
The Budget left £15 billion of forecast headroom in 2029/30, giving the government a buffer against its stability rule.
Yet the spending constraints left unresolved by the Budget mean fiscal reassurance can coexist with weaker demand, limiting the case for sustained monetary tightening.
Marinov described the scale of expectations on Friday:
“Ahead of the November policy meeting, the UK markets expect more than four rate hikes in the coming months and quarters, making the BoE one of the most hawkish central banks and the GBP one of the most attractive high yielders in G10 FX.”
“We doubt that the MPC would meet these hawkish expectations, however, and note that recent policymakers have been reluctant to validate the market views.”
The bank expects tighter financial conditions to reduce the need for aggressive policy action, leaving Pound Sterling vulnerable if the BoE sounds more cautious about 2027.
What This Means for GBP/USD
JPMorgan’s 1.3560-1.3570 resistance area comes into focus if Pound Sterling can secure the close above 1.3430 that Friday failed to deliver. Until then, its more positive assessment describes improving conditions for a breakout rather than an established move into a higher range.
Further weakness in US yields could help the recovery, while a BoE message that keeps additional tightening in play would strengthen the domestic case. A rise in Bank Rate accompanied by cautious guidance would be less persuasive if investors continue to expect several more increases.
The vulnerable combination is a recovery in US yields and a retreat in UK rate expectations. That would remove support from both sides of GBP/USD, testing whether the confidence gained after the Budget is enough to sustain Pound Sterling’s advance.
