Why is the British Pound edging higher above 1.3350 despite strong US jobs data?

• GBP/USD posts modest gains near 1.3370 during early Asian trade on Monday.
• Three further BoE rate increases are priced into markets.
• October US NFP rises by 165,000, comfortably exceeding expectations.

Sterling finds support against the US Dollar (USD) as the Bank of England (BoE) adopts a more hawkish policy stance than expected. In Monday’s early Asian session, GBP/USD advances towards 1.3370, ending a two-day run of losses as the British Pound (GBP) strengthens.

With a 25 basis points (bps) increase last week, the BoE took its benchmark interest rate to 4.00%, delivering its first hike in over three years. The Middle East war and the resulting rise in energy prices were highlighted by BoE Governor Andrew Bailey as the principal consideration for future rate decisions. By the end of next year, markets anticipate three further increases, exceeding what most economists expect.

The decline in oil prices as markets responded to the US midterms would not have altered the decision made today, Bailey said. He nevertheless acknowledged that it "obviously" affects his outlook from here.

Further USD weakness could, however, be contained by the stronger-than-expected US Nonfarm Payrolls (NFP) report. Friday’s release from the US Bureau of Labor Statistics (BLS) showed that employment rose by 165,000 in October, against September’s gain of 60,000 and the market forecast of 65,000. The Unemployment Rate also declined, moving from 4.2% in September to 4.1% in October.

According to the CME FedWatch tool, the probability priced into markets for a December Fed rate increase has climbed to nearly 79.6%, up from 72.8% ahead of the US employment report.

Could inflation risks into 2027 keep the MPC hawkish as the BoE hike aligns with the Fed?

For ABN Amro analysts, the BoE’s latest decision represents a further move along its tightening trajectory: the central bank "raised the bank rate by 25 bps to 4.00%, matching the upper bound of the 3.75-4.00% Fed Funds Rate range." Strong committee backing reinforces their assessment of a continuing hawkish tilt on the MPC, with "eight members" supporting the hike and "one preferred a 50-bps increase," they note. Geopolitical uncertainty also remains central to the BoE’s policy considerations. ABN Amro points out that the committee "projected inflation to reach around 5% by mid-2027 and signalled another increase unless the Middle East conflict is resolved," highlighting the continuing importance of those risks.

Does BoE’s Pill signal a more flexible rate outlook for 2026?

A distinctly more dovish and less certain message emerges from Pill’s FXS Speechtracker reading of 4.2/10, substantially below his historical baseline of 6.4/10. Rather than endorsing a tightening bias, the speech places the emphasis firmly on incoming data: interest rates next year are not predetermined, and no upward course has been set for spring or the period beyond.

Further evidence of that cautious shift comes from the observation that Bank Rate could remain unchanged or even decline if growth stalls. The decisive factors would be the pressure on corporate margins and how companies respond. This greater uncertainty, together with an explicit willingness to cut rates should growth weaken, is modestly negative for GBP and implies less currency support than Pill’s customary position.

Technical Analysis: Can GBP/USD shake off its bearish bias below the 100-day SMA?

The 100-day simple moving average (SMA) continues to limit GBP/USD on the daily chart, with the pair trading just below it. Some underlying demand is indicated by the price holding marginally above the 20-day Bollinger middle band, although the nearby 100-day SMA leaves limited room on the upside. At 51.1, the Relative Strength Index (RSI) remains largely neutral, suggesting insufficient momentum so far to test the prevailing resistance structure.

The first upside hurdle is the 100-day SMA at 1.3395, ahead of the 20-day Bollinger upper band near 1.3485. Regaining that higher level would be necessary for the near-term bias to turn more convincingly bullish. Below the current price, the 20-day Bollinger middle band around 1.3355 provides immediate support; a sustained bout of selling would bring the lower Bollinger band near 1.3225 into focus as the next cushion.

(The technical analysis of this story was written with the help of an AI tool. Know more.)