Pound gains as Fed's Williams sees no 2027 hike

The British pound (GBP) exhibited strength on Tuesday, holding steady within a narrow range between 1.3200 and 1.3300, a stretch it has maintained since September 24. Trading at approximately 1.3250, the midpoint of this range, the GBP/USD pair showed resilience, with no significant movement despite comments from Bank of England external member Greene advocating for a UK interest rate hike.

New York Fed President James Williams suggested a single additional US rate increase for the year, stating no necessity for another in 2027. Despite Greene's argument for a UK rate hike, GBP/USD remained unaffected, while a high was reached after Williams' statement on potential Fed actions. Futures bets indicated a 90% probability that the Fed's rates would remain between 3.75% to 4.00% by year-end, with two rate hikes anticipated based on Williams' perspective.

The GBP's upward movement was primarily attributed to a weaker US dollar rather than a stronger pound. Upcoming economic data, including US inflation figures for September and retail sales, are expected to influence market sentiment. The BoE's Chief Economist will discuss the September hike decision, while UK GDP growth figures will be released on Thursday, both critical factors in determining whether the Bank of England raises rates in November.

The GBP has been below its 50-day Exponential Moving Average and 200-day EMA, with the 50-day average crossing below the 200-day in early October. The pound's value is primarily influenced by monetary policy decisions by the Bank of England, aimed at maintaining steady inflation around 2%.