British Pound holds steady as focus shifts to US Midterm Elections

• With US Midterm Elections approaching, the British Pound holds steady against the US Dollar.
• A Democratic win in the House carries a 95% probability, while the chance of regaining the Senate stands at 79%, according to Deutsche Bank.
• A 7-2 majority is expected to back a 25 bps policy rate increase to 4% at the BoE.

Consolidation in GBP/USD leaves the British Pound (GBP) largely unchanged near 1.3410 against the US Dollar (USD) in Tuesday’s European session. Investors are turning their attention to the United States (US) Midterm Elections, due to begin later during the North American session.

Can Democrats win both the House and Senate?

With the entire House of Representatives, a third of the Senate and 36 state Governors on the ballot, today’s US midterm elections are “the main event,” according to analysts at Deutsche Bank.

Although Republicans hold both chambers of Congress, Deutsche Bank notes that “the incumbent President’s party usually loses ground in midterm votes.” Polling averages and prediction markets, the analysts add, are “consistently pointing to Democratic gains today,” with Polymarket “giv[ing] the Democrats a 95% chance of victory in the House as of this morning, and a 79% chance of retaking the Senate.”

Among this week’s key US economic releases, investors are particularly focused on October’s Nonfarm Payrolls (NFP) report, due on Friday.

Before that, September’s US JOLTS Job Openings release will draw market attention later today at 15:00 GMT. Estimates suggest US employers posted 7.13 million new job openings, a modest increase from August’s 7.097 million.

In the UK, Thursday’s monetary policy announcement from the Bank of England (BoE) is in focus. A 7-2 majority is almost certain to approve a 25 basis points (bps) interest rate increase to 4%.

Following a year of unchanged rates, strategists at Brown Brothers Harriman (BBH) maintain that “firmer UK inflation and economic activity back the move,” while dovish policymakers Alan Taylor and Swati Dhingra are likely to be “supporting a hold”.

GBP/USD Technical Analysis: Can the Recovery Extend?

A near-term bullish bias is supported by GBP/USD’s continued recovery above the 20-period exponential moving average (EMA) at 1.3346, with the pair trading at 1.3410 on the daily chart. As the EMA provides immediate support, buyers appear to be regaining the initiative. Meanwhile, the Relative Strength Index (14) reading of 58.31 remains in positive territory but has yet to indicate overbought conditions. This suggests upward pressure could continue while the price stays above the moving average.

The 1.3410 zone serves as a near-term pivot, a break of which would be needed to dent the positive tone, while initial downside support lies at the 20-period EMA of 1.3346. The dataset shows no major technical resistance immediately above current levels, leaving the pair seemingly positioned to test higher ground. However, a daily close below the EMA would erode the bullish structure and leave scope for a deeper corrective decline.

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