British Pound breaks 1.3350 as Warsh stays vague, BoE hike bets build

The British Pound (GBP) rose above 1.3350 against the US Dollar (USD) on Friday as Federal Reserve Chair Kevin Warsh refrained from offering rate guidance, while the anticipation of a Bank of England (BoE) rate increase in November bolstered the GBP/USD exchange rate, resulting in a gain of over 0.61%. During a meeting at the International Monetary Fund (IMF) in Bangkok, Warsh discussed the global economy, the AI boom, and yields, stating that the Fed had eliminated accommodative measures approximately a month ago.

Despite US inflation data indicating a need for an interest rate hike this week, investors remain doubtful, currently pricing in a 15% probability of a 25-basis-point rise at the October meeting, according to Prime Terminal. In the UK, BoE Governor Andrew Bailey noted that signs of second-round inflation are "quite subdued" and expressed surprise at the economy's resilience, stating it was more robust than anticipated.

A Reuters survey revealed that 54 out of 63 economists expect the BoE to increase the Bank Rate by 25 basis points, aligning with the central bank's forthcoming quarterly forecasts. The UK economic calendar for the following week will include releases on Retail Sales, jobs data, and inflation figures. Meanwhile, in the US, investors are watching housing data, Initial Jobless Claims, and Flash PMIs.

Analysts anticipate the GBP/USD movement will be influenced by UK inflation data, with a stronger-than-expected inflation reading likely to heighten bets on the BoE maintaining hawkish stances, thereby supporting the Pound, which is currently trading below the 1.3400 level. On the daily chart, GBP/USD is trading at 1.3340, exhibiting a capped pattern as the pair stays below the latest simple moving average cluster at 1.3418 and the descending trend-line resistance near 1.3413.

Support levels at 1.3600 and 1.3789, positioned above the current spot, indicate a broader corrective phase rather than a strong bullish trend. The 14-period Relative Strength Index (RSI) at 53.34 has shifted into a mildly positive zone, signaling some stabilizing momentum, yet this surge has yet to challenge the overhead structure.

An immediate resistance level lies at the descending trend line around 1.3413, followed by the simple moving average barrier at 1.3418, forming the first key supply zone. To the upside, the previous rising trend-support levels at 1.3600 and 1.3789 serve as subsequent resistance bands that would need to be retested to alter the prevailing bias.

On the downside, the prior downtrend-line break area at 1.3282 offers initial support, and maintaining this level would be crucial to prevent a further decline towards lower psychological areas. (Technical analysis prepared with AI assistance.) As the world's oldest currency (since 886 AD) and the official currency of the United Kingdom, the GBP is the fourth most traded unit in foreign exchange (FX) markets, accounting for 12% of all transactions, averaging $630 billion daily, as of 2022 data.

Major trading pairs include GBP/USD (Cable), GBP/JPY (Dragon), and EUR/GBP. Issued by the Bank of England (BoE), the Pound's value is primarily determined by monetary policy aimed at achieving a steady inflation rate around 2%, primarily through interest rate adjustments. When inflation is too high, the BoE raises rates to curb inflation, generally supporting GBP as higher rates make the UK more attractive for global investment.

Conversely, when inflation is too low, the BoE may lower rates to stimulate economic growth. Economic data releases, such as GDP, manufacturing and services PMIs, and employment figures, can impact GBP value. A robust economy attracts foreign investment and may prompt the BoE to raise rates, strengthening the GBP. Conversely, weak economic data can weaken the Pound.

Another critical data release for the Pound is the Trade Balance, measuring the difference between a country's export earnings and import spending. A positive net trade balance strengthens the currency, while a negative balance weakens it.