The Bank of England (BoE) is forecast to raise the UK's Bank Rate to 4.00% from 3.75% on Thursday, and money markets have three more hikes priced after that one. GBP/USD holds just above 1.3400 and its 200-day Exponential Moving Average (EMA), on track for a fifth straight gain. What's left for the Pound to get from Thursday is in the guidance, not the decision.
The 7-2 forecast needs four of September's six holders to change their vote
Three of the BoE's nine policymakers voted for a hike on September 17: Chief Economist Pill and external members Greene and Mann. BoE Governor Bailey and Deputy Governors Breeden, Lombardelli and Ramsden voted to hold, but said persistent energy costs could strengthen the case for one. Those four are the votes the forecast needs, and a hike would be the BoE's first since August 2023.
BBH expects external members Dhingra and Taylor to keep voting to hold, which gives 7-2. Nomura expects a 6-3 vote again, with the six on the other side. A narrower hike could read as less appetite for the three more priced after it, and those three are what GBP/USD has been buying.
Money markets price four hikes and most banks see two
Money markets fully price four quarter-point hikes by September 2027, according to LSEG data, which would take the Bank Rate to 4.75%. Of 30 research houses, 27 expect a hike on Thursday, and most of them expect one more in February and a stop at 4.25%. BMO's Mark McCormick expects a one-off, and ING has called the market's pricing extreme.
Governor Bailey has said unconditional promises on future rates aren't appropriate, and the market has priced a year of hikes without one. BBH has warned that the guidance could test the full point of hikes priced for the next 12 months and cap the Pound's gains. A Monetary Policy Report that leans toward February and a stop could take some of that pricing out, and GBP/USD would likely fall if it did.
Both Fed dissenters wanted the quarter-point hike the BoE is forecast to make
The Fed held its rate at 3.75%-4.00% on October 28, with Fed Governor Cook and Cleveland Fed President Hammack voting for a quarter-point hike. US job openings rose to 7.523 million in September against a 7.13 million forecast, and factory orders rose 1.8% against 1.2%. GBP/USD's session high, short of 1.3450, came minutes before those releases, and it has traded below that high since.
Brent fell to near $104 a barrel on talk of progress in US-Iran negotiations, after Iran's negotiating team said there had been no new development. Petrol and diesel drove much of September's inflation overshoot, when UK inflation rose to 3.5%. A cheaper Brent is the one way the BoE's case can weaken before Thursday without anyone voting.
The BoE decides between Wednesday's ADP count and Friday's payrolls
The BoE's decision, minutes and Monetary Policy Report are due at 12:00 GMT on Thursday, and Governor Bailey speaks at 12:30 GMT. Cleveland Fed President Hammack, one of the two October dissenters, speaks at 13:50 GMT, 110 minutes after the BoE has voted on the hike she wanted for the US. Chief Economist Pill briefs businesses on Friday.
Wednesday's US numbers come first, with the Automatic Data Processing (ADP) private jobs count at 13:15 GMT forecast to slow to 69K from 90K. The Institute for Supply Management (ISM) survey of services firms follows at 15:00 GMT, where 54.8 is expected after 54.9. Friday's Nonfarm Payrolls (NFP) at 13:30 GMT are forecast at 65K after 29K, with the unemployment rate forecast at 4.2%. Each feeds the Fed's December decision, the Dollar side of GBP/USD's rate gap.
Midterm results arrive from Wednesday, with prediction markets near 75% that Democrats take the Senate, and Reuters reported traders holding back from big Pound bets ahead of them. New York Fed President Williams speaks at 09:30 GMT on Friday and Fed Vice Chair for Supervision Bowman at 17:15 GMT, either side of payrolls.
Pound levels into the BoE vote
Resistance: Monday's high just under 1.3450 is the highest GBP/USD has traded since September 16, and Tuesday's whole range is inside Monday's. Above it, 1.3500 is where the pair turned lower on September 16, the day of the Fed's hike.
Support: The 200-day EMA just under 1.3400 held Tuesday's dip by a few pips. Below it, 1.3300 is the October 29 low, and the October 28 low just above 1.3250 is where the five-session run began.
Bias: Lean short below 1.3450 into Thursday, because the pricing has run further than most research houses expect the BoE to go. A daily close back under the 200-day EMA opens 1.3300, then 1.3250. The daily Stochastic Relative Strength Index (Stoch RSI) is overbought near 85 and starting to roll over. A daily close above 1.3450 puts the pair through Monday's high and ends the short case.
GBP/USD daily chart
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