On Thursday (November 7th), during the Asian market early session, the British pound stabilized slightly against the US dollar, currently fluctuating near 1.2883. The previous trading day saw the pound fall by 1.2%, showing some resilience against the backdrop of a surging US dollar. As the tariff plans of the newly appointed US President Trump become clearer, the market generally believes that the UK economy will be impacted, and the pound may face more fluctuations in the coming days.
This Thursday, the Bank of England is expected to cut rates by 25 basis points to 4.75%, marking the second cut since 2020. Analysts believe that statements from the Bank's Governor, Bailey, will have a crucial impact on the pound's trend. Currently, the short-term technical outlook for the pound is leaning bearish, with critical support around the 200-day moving average at 1.2813. Although a rate cut is almost certain, the market is focused on whether the Bank of England will hint at future monetary policy directions, especially in light of the new UK budget possibly driving up inflation.
A week ago, UK Chancellor Reeves introduced the new government's first tax and spending plan, with the Office for Budget Responsibility (OBR) predicting that the budget may drive inflation higher, expecting consumer prices to rise to 2.6% by 2025, surpassing the Bank of England's 2% target. This outlook has already led investors to lower expectations for future rate cuts. Analysts point out that the budget plan won't change this week's rate cut decision but will influence long-term rate cut expectations.
On the other hand, Trump's statement about imposing tariffs on all imported goods has also increased market uncertainty. However, since the Bank of England's decision was finalized before the election results were announced, it is expected that Governor Bailey will not specifically respond to Trump's policies. Although the market generally expects a rate cut this week, some economists believe the Bank of England may hold off in December to observe the inflation impact brought by the budget plan.
Technically, indicators for the pound against the US dollar are slightly negative on the daily chart, with short-term support at 1.2835 and key support at the August low of 1.2665. Resistance levels are at 1.3043 and 1.3103, respectively, and the market will closely watch the pound's movement following the rate cut.
