British Pound Outlook: GBP/USD Recovery Emerges Ahead of UK Budget

British Pound Forecast: GBP/USD

GBP/USD extends the rebound from the monthly low (1.2907) to keep the Relative Strength Index (RSI) above 30, and the exchange rate may stage a larger recovery going into the UK Budget as it starts to carve a series of higher highs and lows.

British Pound Outlook: GBP/USD Recovery Emerges Ahead of UK Budget

GBP/USD trades to a fresh weekly high (1.3012) following the weaker-than-expected US Job Openings and Labor Turnover Survey (JOLTS), and it remains to be seen if the update from Chancellor of the Exchequer Rachel Reeves will influence the exchange rate as the Bank of England (BoE) starts to unwind its restrictive policy.

Join David Song for the Weekly Fundamental Market Outlook webinar. David provides a market overview and takes questions in real-time. Register Here

It seems as through the Monetary Policy Committee (MPC) will continue to switch gears after keeping UK interest rates unchanged at the September meeting as the majority insists that ‘in the absence of material developments, a gradual approach to removing policy restraint would be warranted.’

However, plans to tighten fiscal policy may put pressure on Governor Andrew Bailey and Co. to support the UK economy, and the MPC may show a greater willingness to achieve a neutral policy sooner rather than later in an effort to avoid a recession.

With that said, the British Pound may face headwinds ahead of the BoE meeting on November 7 amid speculation for lower UK interest rates, but GBP/USD may further retrace the decline from the monthly high (1.3390) as the RSI reverses ahead of oversold territory.

GBP/USD Price Chart –Daily

Chart Prepared by David Song, Strategist; GBP/USD on TradingView

GBP/USD appeared to be stuck in a narrow range following the failed attempt to break/close below the 1.2900 (23.6% Fibonacci retracement) to 1.2910 (50% Fibonacci extension) region but a close above 1.3000 (61.8% Fibonacci extension) may push the exchange rate back towards the 1.3140 (78.6% Fibonacci extension) to 1.3150 (23.6% Fibonacci extension) zone.
A break/close above 1.3210 (50% Fibonacci extension) brings 1.3310 (100% Fibonacci extension) on the radar, with the next area of interest coming in around the monthly high (1.3390).
At the same time, a break/close below the 1.2900 (23.6% Fibonacci retracement) to 1.2910 (50% Fibonacci extension) region opens up 1.2820 (38.2% Fibonacci extension), with the next area of interest coming in around 1.2710 (23.6% Fibonacci extension) to 1.2760 (61.8% Fibonacci retracement).

Additional Market Outlooks

Monetary vs Fiscal Policy: Implications for FX Markets

USD/CAD Eyes August High as RSI Holds in Overbought Territory

AUD/USD Vulnerable amid Failure to Defend September Low

Gold Price Forecast: RSI Falls Back from Overbought Zone

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Products and services available depend on your location and the entity holding your account. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.