• The Bank of England cut rates by 25-bps.

• Markets expect two to three BoE rate cuts in 2025.

• The Federal Reserve also lowered borrowing costs by 25=bps.

The GBP/USD outlook shows a pause in yesterday’s rally as traders lock in profits. The pound rose on Thursday after the Bank of England lowered borrowing costs and signalled higher inflation in the future due to the new government budget.

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As expected, the Bank of England cut rates by 25-bps on Thursday. However, traders focused on the message indicating that inflation might be higher than expected in the future. This shift in tone came after the government unveiled a new budget with higher borrowing and spending. Consequently, markets expect two to three rate cuts in 2025, compared to earlier expectations of at least four. This boosted sterling, leading to a rebound from lows it hit due to Trump’s win.

On the other hand, the Federal Reserve also lowered borrowing costs by 25bps and delivered a cautious tone regarding future rate cuts. The new Trump administration comes with changes to fiscal policy that might change the inflation outlook. Notably, Trump has proposed tax cuts, tariffs on imported goods, and immigration laws that might increase inflation. If this is the case, the Fed might have to pause its rate cuts at some point. Consequently, the outlook for the dollar remains bright.

Nevertheless, markets still expect another rate cut in December. Before this meeting, the US will release more data on employment and inflation that could shift this outlook. A robust labor market and higher-than-expected inflation could lead to a pause in December.

GBP/USD key events today

The pound will likely end the week quietly as no key events are coming from the US or the UK.

GBP/USD technical outlook: Price settles in the 1.2850-1.3000 range

On the technical side, the GBP/USD price has rebounded after finding support at the 1.2850 level. However, it now seems that the price has entered a period of consolidation, with support at 1.2850 and resistance at 1.3000.

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Currently, bulls are in the lead since the price sits above the 30-SMA, with the RSI above 50. However, they have failed to breach the range resistance, leading to a pullback. If the price breaks below the SMA, it will continue consolidating. On the other hand, if it breaks above, the price might start a bullish trend.

https://www.forexcrunch.com/blog/2024/11/08/gbp-usd-outlook-pound-eases-as-traders-lock-in-profits/