**Pound Sterling to Dollar Forecast: GBP Rises as Bank of England Holds, US Shutdown Weighs on USD**
*Article inspired by the original reporting of Adam Solomon, Currency News UK*
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**Introduction**
The foreign exchange market has experienced renewed volatility as the pound sterling (GBP) recoups ground against the US dollar (USD). Recent decisions and statements from the Bank of England (BoE), in combination with mounting concerns over a potential US government shutdown, have shaped current market sentiment. This article offers an in-depth examination of the drivers affecting the GBP/USD pair, assesses investor reactions, and provides a forecast for the coming weeks.
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**BoE Leaves Interest Rates Unchanged: Sterling Finds Support**
On its most recent policy meeting, the Bank of England voted to keep interest rates stable at 5.25 percent. Although this decision was anticipated, the language used by policymakers hinted at a cautious “higher for longer” stance, with Governor Andrew Bailey resisting growing market anticipation of rate cuts as early as the first half of 2025.
– Monetary Policy Committee (MPC) split 6-3 in favor of holding rates, with three members preferring a 25 basis-point hike
– BoE signaled ongoing vigilance against inflation, suggesting further tightening if warranted
– Projections from the Bank indicate inflation is likely to fall back to its 2 percent target in the medium term
– Policymakers acknowledged signs of cooling within the economy, though wage growth and services inflation remain stubbornly high
This combination of holding rates and guarded optimism provided structural support for the pound, which responded positively amid broader uncertainty in global markets.
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**US Dollar Falters as Shutdown Looms**
While sterling has found support on the back of BoE policy, the US dollar has lost some momentum. Market concern is mounting over a possible federal government shutdown if lawmakers fail to reach a spending agreement before the imminent deadline.
Key risks influencing the dollar’s position include:
– Potential disruptions to key economic data releases, including payroll numbers and inflation figures, should a shutdown occur
– Heightened uncertainty over the Federal Reserve’s next moves, with the possibility that data blackouts could hinder monetary guidance
– Debt ceiling worries exacerbating investor caution, with markets wary of further political impasse
These uncertainties generated increased volatility, ushering in a risk-off tone in financial markets and weighing on the greenback relative to major currencies, including sterling.
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**Currency Market Reaction: GBP/USD Trends and Technical Picture**
Since the beginning of the fourth quarter, the GBP/USD pair has exhibited significant two-way volatility, trading between 1.21 and 1.23.
Recent catalysts have included:
– BoE’s refusal to signal near-term policy easing, boosting sterling bulls
– Dollar weakness tied to both political risk and softer data
– Challenging global risk environment buoying safe-haven demand for the dollar, countered by shutdown fears
As of the most recent session, sterling rallied back towards 1.23, finding bids amid improved risk sentiment, although analysts remain cautious over UK growth prospects.
Technical analysis of the GBP/USD pair reveals:
– Resistance at the 50-day moving average near 1.23; a break above may open the path toward 1.2350 and 1.24
– Support levels are seen near 1.2140 and 1.21, a breach of which could lead to further downside
– Relative Strength Index (RSI) trends between neutral and mildly overbought, suggesting the pair is currently consolidating gains
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**Macroeconomic Data: Fundamentals in Focus**
Economic indicators from both the UK and US continue to drive currency valuations.
**United Kingdom Key Data Points:**
– Services Purchasing Managers’ Index (PMI) fell below 50, indicating modest contraction in the sector
– Wage growth remains elevated at over 7 percent annually, supporting the BoE’s cautious inflation outlook
– Headline inflation slowed to 6
Read more on GBP/USD trading.