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GBP/USD heads into a week of U.S. midterm elections and payrolls data with fading Federal Reserve hike bets giving it room to extend October’s recovery.
The Pound to Dollar exchange rate records a handsome 0.34% gain on Friday’s close to reach 1.3417 at the time of update, having delivered a second consecutive weekly gain last week, and we look for the recovery to extend towards 1.35 in the coming days.
The midterm elections on Tuesday are the headline event for the dollar, but Friday’s jobs report is more likely to set the pair’s direction because it feeds directly into expectations for the Fed’s December decision.
From a technical perspective, the setup is constructive short-term, GBP/USD has returned to its 100-day moving average, the blue line on the chart, a level that has acted as a medium-term fulcrum for the pair this year, and the RSI in the lower panel is rising in support of a break higher:
GBP/USD daily chart. Image © Pound Sterling Live, chart created with TradingView.
GBP/USD has crossed back and forth over the 100-day several times in 2026, and the side on which it settles has tended to set the tone for the weeks that follow.
The RSI reads 59 and is rising, a sign that buying momentum is building without the pair yet being stretched.
A daily close above 1.34 would bring graphical resistance at 1.3506, the purple line, into view, with the August highs at 1.3661 and 1.3676 beyond that.
Support sits at 1.3302 and 1.3274, the lines that capped GBP/USD through the first half of October before turning into a floor late in the month.
We look for GBP/USD to extend towards 1.3506 this week. A daily close beneath 1.3302 would change Pound Sterling Live’s near-term Pound to Dollar forecast.
On a medium-term view, a sustained move above 1.35 would mark the end of the decline that began in August, while failure at current levels would leave the pair confined to a range between 1.3140 and 1.35.
Last week Pound Sterling Live looked for GBP/USD to stall and drift towards 1.3302. The pair dipped to 1.3273 on Wednesday before recovering to a high of 1.3434 on Friday.
U.S. Midterm Elections Unlikely to Leave a Lasting Mark on the Dollar
U.S. voters go to the polls on Tuesday, with prediction markets putting the chance of a Democratic sweep of both chambers of Congress at around two-thirds, according to Lloyds.
A Democratic sweep would place the biggest constraint on President Trump’s domestic and fiscal agenda, but Lloyds expects the dollar’s direction to be decided elsewhere: “The outlook for US growth, inflation and Fed policy is likely to remain more important,” says the bank in its Market Insights Weekly of 30 October.
A close result could bring a short burst of volatility, but we doubt the outcome will have a lasting effect on GBP/USD.
Friday’s Jobs Report Is the Bigger Test for the Dollar
The dollar has lost support as markets scale back expectations for Fed hikes, and Friday’s payrolls report will decide whether that retreat continues.
Chair Kevin Warsh declined to commit to a December hike at last week’s press conference, and “the US dollar has been undermined by the scaling back of Fed rate hike expectations,” says Lee Hardman, FX Strategist at MUFG.
Disappointing earnings from Alphabet, Amazon and Intel then pushed investors into Treasuries, and the two-year yield fell 10 basis points to 4.60%, its lowest since mid-September, with rates traders pricing 13 basis points of future Fed tightening out of the curve, according to Pepperstone.
The nonfarm payrolls report lands at 13:30 on Friday, with consensus looking for 55,000 jobs in October after 29,000 in September, the unemployment rate holding at 4.2% and average hourly earnings rising 0.3% on the month.
How does a U.S. jobs report reach GBP/USD? A strong report raises the odds of a Fed hike in December, lifting U.S. yields and the dollar and pushing GBP/USD lower, while a weak one pushes those odds back and supports the pair. Under the playbook, payrolls beating consensus would favour the dollar, and a shortfall would favour the pound.
Lloyds forecasts 60,000 jobs and Westpac 75,000, both above consensus, and both houses describe the labour market as broadly stable.
The ISM manufacturing and services surveys, the JOLTS job openings report and the ADP employment figures, where consensus is 70,000, complete a second-tier U.S. calendar.
The Bank of England Gives the Pound a Second Source of Support
The pound has benefited from a fading UK risk premium since the Budget. “A continuity Budget with fiscal headroom upside potential pushes the pound’s perceived fiscal risks to the background,” says Lefteris Farmakis, analyst at Barclays.
The Bank of England is expected to raise Bank Rate to 4.00% from 3.75% on Thursday, and guidance that leaves the door open to further hikes would add to the pound’s support against the dollar.
With Fed hike expectations fading and the pound’s fiscal risk premium receding, Pound Sterling Live’s Pound to Dollar forecast looks for gains towards 1.3506 this week, provided Friday’s jobs report does not revive the case for a December Fed hike.
