**Pound Sterling to US Dollar Forecast: GBP Rises as Bank of England Holds, US Shutdown Risks Weigh on Dollar**
*By Tim Clayton, CurrencyNews.co.uk*
The British pound sterling posted gains against the US dollar following key developments both in the UK and the US. The Bank of England (BoE) decided to maintain its current interest rate policy stance, which was closely watched by market participants. Meanwhile, persistent risks concerning a potential US government shutdown weighed heavily on the dollar’s performance. This article explores the recent GBP/USD movements, central bank policy decisions, and the impact of political risk in the US, offering a comprehensive forecast for traders and investors.
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## Bank of England Maintains Rates: Implications for Pound Sterling
On November 2, 2024, the BoE released its latest policy decision, electing to keep its main Bank Rate at 5.25 percent. This second consecutive hold came in line with market expectations after a string of previous rate hikes aimed at tackling persistent inflation.
### Key Takeaways from the November BoE Meeting:
– **Unanimous Vote to Hold**: The Monetary Policy Committee (MPC) voted 6-3 to keep rates unchanged, with three members still favoring a hike.
– **Forward Guidance**: Governor Andrew Bailey confirmed that it is too soon to consider cutting rates, re-emphasizing the central bank’s focus on bringing inflation back to its 2 percent target.
– **Inflation Concerns**: The Bank reiterated that inflation risks remain skewed to the upside, with services inflation and wage growth proving stickier than anticipated.
– **Economic Forecasts**: Official projections showed weaker economic growth expectations, with the BoE now predicting stagnant GDP for the next two years.
Following the announcement, the pound initially experienced some volatility but found firm support as markets concluded that a rate cut was not on the near-term horizon. Sterling’s resilience was further underpinned by the BoE’s hawkish tone, which contrasted with market pricing that had begun to look for policy easing in 2024.
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## US Economic Anxiety Intensifies as Shutdown Looms
On the other side of the Atlantic, developments in Washington added to the pressure on the US dollar. Lawmakers faced a looming government shutdown, with significant differences remaining between the Democratic and Republican parties about funding legislation. This political gridlock fueled market fears about the negative impact on the economy and the dollar.
### Main Factors Driving US Dollar Weakness:
– **Government Shutdown Risk**: Threats of a federal shutdown can lead to decreased investor confidence and risk aversion. Safe-haven flows may typically support the dollar, but protracted uncertainty and potential negative ratings actions unsettle currency markets.
– **FOMC Pause and Economic Signals**: The Federal Reserve also decided recently to hold interest rates steady, in line with expectations. However, softer US economic data, including slowing jobs growth and declining consumer confidence, amplified concerns of a slowdown.
– **US Yields Retreat**: Treasury yields, a significant driver of the dollar’s value, reversed earlier gains as investors reevaluated the prospects of further tightening by the Fed.
– **Rising Fiscal Concerns**: The possibility of a US government default or shutdown highlighted the nation’s mounting fiscal challenges, weakening the dollar’s appeal against other major currencies, including the pound.
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## GBP/USD: Recent Performance and Technical Outlook
The pound’s appreciation against the dollar over the past week has been marked by sharp volatility but notable upward momentum, driven by the factors outlined above.
### Recent Movements:
– After the BoE decision, GBP/USD rose from the 1.21 region, breaking the 1.22 and subsequently 1.23 levels within days. This marks a significant rebound from lows seen in early October.
– The move higher was supported by both a reassessment of UK rate policy as less dovish than markets had priced and by the dollar’s struggles amid US economic and
Read more on GBP/USD trading.