Pound Sterling rises after BoE cuts interest rates by 25 bps, Fed policy awaited

• The Pound Sterling rebounds sharply after the BoE cuts interest rates by 25 bps to 4.75%, as expected.
• The US Dollar should remain well-supported by Trump’s victory in the US presidential election across the board.
• Investors await the Fed monetary policy decision, with markets expecting to cut interest rates by 25 bps.

The Pound Sterling (GBP) gains against its major peers on Thursday as the Bank of England (BoE) reduces its interest rates by 25 basis points (bps) to 4.75%. Out of the nine-member-led Monetary Policy Committee (MPC), eight members voted for a rate cut, while external policy member Catherine Mann favored keeping interest rates steady. Economists had anticipated that two MPC members would support leaving interest rates at their current levels.

Catherine Mann was already anticipated to support a stable policy decision. In a panel discussion at the sidelines of International Monetary Fund (IMF) meetings on October 24, Mann said, "If you have structural persistence in the relationship between wages and price formation that lasts, that is persistent and embedded, then it's premature to start cutting until you purge those behaviors, when asked about her stance on interest rates.

This is the second interest rate cut by the BoE this year. The BoE started reducing interest rates in August by cutting borrowing rates by 25 bps but opted to keep them steady in September.

On the interest rate guidance, BoE Governor Andrew Bailey has commented that interest rates will continue to fall gradually if the economy evolves as expected. However, he emphasized that the monetary policy will remain restrictive until the risks of inflationary pressures remaining persistent get dissipated. Bailey refrained from making any presumption about the impact of US Donald Trump's administration on their economy, however, the central bank will remain vigilant to Trump's trade policy decisions.

The central bank has reduced Gross Domestic Product (GDP) forecasts for this year to 1% from 1.25% projected in August and sees wage growth stabilizing at 4%.

Daily digest market movers: Pound Sterling rises sharply against US Dollar ahead of Fed policy

• The Pound Sterling bounces back strongly to near 1.2970 against the US Dollar (USD) in Thursday’s North American session after refreshing an almost 11-week low near 1.2830 on Wednesday. The GBP/USD pair rebounds as the US Dollar (USD) corrects slightly after a sharp rally. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, drops to near 104.90 after posting a fresh four-month high around 105.40.
• The US Dollar had a strong run-up on Wednesday due to a landslide victory of Republican candidate Donald Trump over his Democratic rival Kamala Harris. The appeal of the Greenback improved sharply as Trump has vowed to raise tariffs on imports by 10% universally and lower corporate taxes if he wins the presidential elections, measures that traders interpreted as a positive for the US Dollar.
• Higher tariffs could push demand for domestic output, while corporate lower taxes would leave more money in the hands of corporations, which will boost investments. A scenario that will result in higher investments, spending and labor demand will escalate price pressures and allow the Federal Reserve (Fed) to take a hawkish stance on interest rates.
• To get meaningful cues about the impact of Trump’s victory on the United States (US) interest rate path and the inflation outlook, investors will focus on the Fed’s policy meeting at 19:00 GMT. Officials are widely anticipated to cut interest rates by 25 basis points (bps) to the 4.50%-4.75% range. 
• Meanwhile, Initial Jobless Claims for the week ending November 1 have come in at 221K, as expected, slightly higher than the former release of 218K. Q3 Unit Labor Costs rose at a faster-than-expected pace of 1.9%.

Technical Analysis: Pound Sterling seeks to stabilize above 1.2900

The Pound Sterling rebounds after posting a fresh 11-week low near 1.2830 against the US Dollar. The GBP/USD pair recovered after discovering buying interest near the 200-day Exponential Moving Average (EMA) around 1.2860.

However, the near-term trend remains bearish as the 20-day and 50-day Exponential Moving Average (EMAs)around 1.2990 and 1.3030, respectively, are declining.

The breakdown from the lower boundary of a rising channel on the daily time frame has also added to evidence supporting more downside.

The 14-day Relative Strength Index (RSI) hovers near 40.00. A bearish momentum would resume if the RSI (14) fails to hold this level.

Looking down, the round-level support of 1.2800 will be a major cushion for Pound Sterling bulls. On the upside, the Cable will face resistance near the psychological figure of 1.3000.