BoE Deputy Governors Lombardelli and Breeden indicated they are edging towards supporting a rate rise, yet Sterling still fell for a fourth session, leaving GBP/USD just above 1.3200, its lowest in nearly three months. In the US, New York Fed President Williams said one more increase before year-end was a reasonable expectation, while Philadelphia Fed President Paulson said modest further tightening may be warranted. Jobless claims printed at 197K versus a 201K forecast, and the Fed meets on October 28 ahead of the BoE on November 5, placing any UK move eight days after a US decision that markets already view as likely.
The BoE kept Bank Rate at 3.75% on September 17 by a 6–3 vote, with Chief Economist Pill and external members Greene and Mann preferring 4%, while Lombardelli and Breeden voted to hold. Markets imply about a 75% chance of a quarter-point rise on November 5 and another by February, which would take Bank Rate to 4%, matching the top of the Fed’s range now and potentially the bottom after October 28. Reuters reported Washington and Tehran negotiators are weighing a phased agreement under which Iran would reopen the Strait of Hormuz, even as Brent traded above $106 a barrel. Before October 2, the UK has only the final Q2 GDP estimate on September 30 at 06:00 GMT, forecast at 0.4% QoQ and 1.2% YoY, unchanged; further BoE speeches follow, while US releases include durable goods and the UoM survey, the PCE price index on September 30, and NFP on October 2 after August’s 162K. Technically, resistance sits just above 1.3250 and then 1.3300, while support is 1.3200, then just under 1.3150 and 1.3100; Stoch RSI is about 11, with the downside view below 1.3250, targeting 1.3150 then 1.3100, and invalidated by a daily close above 1.3300.
GBP/USD Tactical Short Setup
We see a strong tactical opportunity to short GBP/USD in the coming weeks as the pair struggles to hold the 1.3200 support level. Despite hawkish talk from Bank of England officials, the US dollar’s yield advantage is set to widen first, putting relentless downward pressure on the pound. With the Federal Reserve scheduled to decide on rates on October 28—eight days before the BoE—any US tightening will likely pre-empt and overshadow UK policy moves.
Our short bias remains highly active below the 1.3250 resistance level, and we are targeting a move down to 1.3150, with a secondary target at 1.3100. This bearish outlook is supported by recent US labor market strength, highlighted by weekly jobless claims falling unexpectedly to 197,000, which keeps the Fed on a hawkish path. Additionally, the daily Stochastic Relative Strength Index (Stoch RSI) for GBP/USD is hovering around a weak reading of 11, confirming that momentum is firmly with the sellers.
Trading Strategy and Risk Factors
For derivative traders, executing short positions on rallies toward 1.3250 offers an attractive risk-reward ratio, with a tight stop-loss placed just above the key 1.3300 psychological ceiling. We should also closely watch Brent crude oil prices, which remain elevated above $106 a barrel and continue to stoke global inflation fears. If upcoming US PCE inflation data on September 30 or Nonfarm Payrolls on October 2 beat expectations, it will likely accelerate the pound’s decline toward our 1.3100 target.
