GBP Under Pressure as UK Budget and The Fed Take Center Stage

The GBP/USD pair weakened toward the 1.3300 level during Wednesday’s Asian trading session (October 28), as investors adopted a cautious stance ahead of the UK budget announcement and the Federal Reserve’s interest rate decision. The pound remains under pressure as the market awaits clarity on the UK’s fiscal policy direction and the outlook for US interest rates.

UK Chancellor of the Exchequer John Healey is set to deliver his first budget, facing the challenge of easing the cost-of-living burden on households while simultaneously supporting the business sector. However, his policy space is constrained by high government borrowing costs and significant tax hikes previously implemented by the prior administration.

In the US, the Federal Reserve is expected to keep interest rates within the 3.75%–4% range. The market will be closely monitoring communications from Fed Chair Kevin Warsh, particularly for any signals regarding policy moves in December. A hawkish tone could strengthen the dollar and exert further downward pressure on the GBP/USD pair.

Market estimates suggest a 92.8% probability that the Fed will hold rates steady in October, while the likelihood of a hike in December stands at approximately 84.4%. These expectations make the trajectory of the US dollar a key driver for the pound’s short-term movements.

From a technical perspective, the GBP/USD pair carries a neutral-to-bearish bias after falling below the 1.3350–1.3355 zone. Should the pressure persist, the 1.3300 level will be a focal point, with potential for further weakness toward the 1.3250–1.3275 range. Nevertheless, a decline could also trigger buying interest from investors looking for better entry points.

Meanwhile, comments from Bank of England official Greene indicate that wage pressures remain a concern, as the process of wage disinflation appears to have stalled. A relatively resilient economy and the risk of secondary inflation could lead the Bank of England to exercise greater caution regarding interest rate cuts, which may, in turn, help limit the pressure on the pound. (srh)

Source: Newsmaker.id