Pound Sterling recovers strongly on improved risk-appetite, UK Employment in focus


  • Pound Sterling juggles around 1.2150 as investors shift focus to the UK employment data.
  • Economists see a decrease in employment in the quarter to August due to a poor demand outlook.
  • The BoE is anticipated to keep interest rates unchanged at its November monetary policy meeting.

The Pound Sterling (GBP) revives strongly ahead of the UK Employment data, which will be published on Tuesday, as the risk profile turns cheerful. The broader GBP/USD pair outlook still remains vulnerable as economists expect employment levels to decrease again in the three months to August, in a sign that firms are cutting back on their workforces due to a dismal demand outlook. 

Higher interest rates by the Bank of England (BoE) and stubborn price pressures have squeezed households’ real income significantly, weighing on demand. Deepening Israel-Palestine tensions add to uncertainty and have the potential to cause higher energy prices, adding to inflation pressures. In this context, investors see the BoE keeping interest rates unchanged for the second straight time in November.

Daily Digest Market Movers: Pound Sterling jumps as US Dollar falls

  • Pound Sterling soars after consolidating for more than a week as the interest rates are seen unchanged by the Bank of England monetary policy meeting, which is scheduled for next week.
  • The majority of UK economic data released in October indicates that the BoE will not raise interest rates further, keeping them at 5.25% for a second straight meeting. The UK Manufacturing PMI continued to remain below the 50.0 threshold and Retail Sales contracted, signaling weak economic activity and likely denting consumer inflation expectations.
  • Consumer spending has remained weak in September as both high inflation and borrowing rates have squeezed households’ pockets.
  • UK inflation topped expectations marginally in September but BoE Governor Andrew Bailey, in an interview with Belfast Telegraph, remained confident over a marked fall in inflation next month.
  • Bailey said that a sharp decline in wage growth should bring down inflation to 2%.
  • The GBP/USD pair trades back and forth around 1.2150 but an action move is expected after the release of labor market data, which will be published on Tuesday at 06:00 GMT.
  • This month, the UK Office for National Statistics (ONS) postponed part of the employment data release as the agency said it failed to get responses from some private players.
  • As per the estimates, the UK employers shed 198K jobs in the three months to August. In the quarter to July, the labor force saw a drawdown of 207K. The Unemployment Rate is expected to remain unchanged at 4.3%. Claimant Count Change is seen rising by 2.3K in September against a 0.9K increase in jobless claims in August.
  • UK employers cut back on their workforce and inventory due to a poor demand outlook. Last month, UK firms said that higher borrowing costs and persisting price pressures have dented households’ demand.
  • Last week, ratings agency Moody's revised UK's outlook to "stable" from "negative", saying policy predictability has been restored after heightened volatility last year around the so-called "mini-budget" crisis under former Prime Minister Liz Truss, Reuters reported.
  • The market mood remains downbeat as Israel-Palestine tensions have increased due to the Gaza hospital blast, with more than one thousand casualties. 
  • The US Dollar trades directionless in a narrow range above 106.00 as investors shift focus to the Q3 Gross Domestic Product (GDP) data scheduled for Thursday.
  • Meanwhile, neutral guidance on interest rates from Federal Reserve (Fed) Chair Jerome Powell and his colleagues has restricted upside in the US Dollar.
  • Cleveland Fed Bank President Loretta Mester said on Friday that the policymakers need to be “nimble” amid current economic uncertainties. 

Technical Analysis: Pound Sterling climbs above 1.2200

Pound Sterling jumps above 1.2200 ahead of the UK employment data to have a more complete set of economic data for shaping the BoE’s monetary policy action in November. The 20-day Exponential Moving Average (EMA) at around 1.2200 continues to act as a barricade for the Pound Sterling bulls. The broader GBP/USD outlook remains vulnerable amid a death cross signal by the 50-day and 200-day EMAs.

BoE FAQs

What does the Bank of England do and how does it impact the Pound?

The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).

How does the Bank of England’s monetary policy influence Sterling?

When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.

What is Quantitative Easing (QE) and how does it affect the Pound?

In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.

What is Quantitative tightening (QT) and how does it affect the Pound Sterling?

Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

XM
Account
7.2
Tools
9.2
Service
9.4
Trading
9.0
Trust
7.0
Experience
8.4
Read review
Moneta Markets
Account
7.4
Tools
6.6
Service
8.0
Trading
6.6
Trust
5.2
Experience
9.2
Read review
Trading Pro
Account
7.2
Tools
5.2
Service
6.6
Trading
8.0
Trust
5.0
Experience
7.0
Read review
Pepperstone
Account
8.2
Tools
8.2
Service
7.4
Trading
9.0
Trust
8.8
Experience
9.0
Read review
XM
Read review
Moneta Markets
Read review
Trading Pro
Read review
Pepperstone
Read review
Trading Pro
Read review
Pepperstone
Read review
XM
Read review
Moneta Markets
Read review
Trading Pro
Account
7.2
Tools
5.2
Service
6.6
Trading
8.0
Trust
5.0
Experience
7.0
Read review
Pepperstone
Account
8.2
Tools
8.2
Service
7.4
Trading
9.0
Trust
8.8
Experience
9.0
Read review
XM
Account
7.2
Tools
9.2
Service
9.4
Trading
9.0
Trust
7.0
Experience
8.4
Read review
Moneta Markets
Account
7.4
Tools
6.6
Service
8.0
Trading
6.6
Trust
5.2
Experience
9.2
Read review

Recommended content


Recommended content

Editors’ Picks

EUR/USD dips below 1.1000 as Trump authorizes 90-day pause on tariffs

EUR/USD dips below 1.1000 as Trump authorizes 90-day pause on tariffs

EUR/USD retreated below the 1.1000 mark on headlines indicating that United States President Donald Trump authorized a 90-day pause on non-retaliating countries. The pause applies to reciprocal and 10% tariffs, effective immediately, according to a Truth Social post. FOMC Minutes indicated increasing uncertainty.

 

EUR/USD News
GBP/USD eases further on tariffs pause announcement, USD still weak

GBP/USD eases further on tariffs pause announcement, USD still weak

GBP/USD's correction seems to have met a decent contention around the 1.2750 zone so far on Wednesday, as investors continue to assess the ongoing US-China trade war. US doubles the bet, announced 125% levies on Chinese imports. 

GBP/USD News
Gold recedes to $3,050 on Trump's headlines

Gold recedes to $3,050 on Trump's headlines

Gold prices now give away part of their advance and revisit the $3,050 zone per troy ounce after President Trump announced a 90-day pause on reciprocal and 10% tariffs. FOMC Minutes passed unnoticed as optimism returned. 

Gold News
Dow Jones Industrial Average rockets 6% higher on tariff suspension

Dow Jones Industrial Average rockets 6% higher on tariff suspension

The Dow Jones Industrial Average (DJIA) skyrocketed on Wednesday, surging over 6% on the day and returning to the 40,000 handle after the Trump administration announced yet another pivot on its own tariff policies.

Read more
Tariff rollercoaster continues as China slapped with 104% levies

Tariff rollercoaster continues as China slapped with 104% levies

The reaction in currencies has not been as predictable. The clear winners so far remain the safe-haven Japanese yen and Swiss franc, no surprises there, while the euro has also emerged as a quasi-safe-haven given its high liquid status.

Read more
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

Forex MAJORS

Cryptocurrencies

Signatures

Best Brokers of 2025