The GBP/USD pair is trading around 1.3445 during the early European session on Tuesday, maintaining gains near 1.3450. However, caution may rise later in the day ahead of the US October Consumer Price Index (CPI) inflation report. Last week, the Bank of England (BoE) raised its benchmark interest rate by 25 basis points to 4.00%, its first increase in over three years. The BoE indicated that further hikes are possible if the US-Iran conflict persists.
Andrew Goodwin, chief UK economist at Oxford Economics, noted that December's rate decision is uncertain, with oil and natural gas prices being key factors. Meanwhile, the upbeat US October jobs report has increased bets on a Federal Reserve rate hike next month, with an 84% chance priced in by markets.
Analysts at ABN Amro highlighted that the BoE's decision was hawkish, with eight members supporting the 25 bps increase and one favoring a 50 bps hike. The committee projected inflation to reach around 5% by mid-2027 and signaled another rate increase unless the Middle East conflict is resolved.
BoE's Deputy Governor Ben Broadbent suggested that rate cuts could be on the table for 2026, emphasizing uncertainty and no preset path for rate increases. This dovish shift raises downside risks for the Pound, particularly if UK economic data underperforms. Technical analysis shows GBP/USD holding a bullish bias above the 100-day SMA, with key resistance at 1.3500 and support at 1.3400.