GBP/USD holds gains above 1.3050 ahead of BoE policy decision

GBP/USD extends its gains for the second successive session, trading around 1.3060 during the Asian hours on Thursday. The pair holds gains as the Pound Sterling (GBP) receives support ahead of the Bank of England’s (BoE) interest rate decision due later in the day. The BoE is widely expected to keep its policy rate unchanged at 4% in November, but softer inflation and wage data have strengthened the case for rate cuts in the coming months.

Expectations are mounting for Chancellor Rachel Reeves to introduce stricter fiscal measures in her November 26 budget to tackle the UK’s substantial borrowing requirements. In a pre-budget address, Reeves hinted at potential tax hikes and underscored the importance of managing debt and borrowing expenses.

The GBP/USD pair also draws support as the US Dollar (USD) declines due to improved market sentiment, driven by the dampened likelihood of a rate cut by the US Federal Reserve (Fed) in December. Fed funds futures traders are now pricing in a 62% chance of a cut in December, down from 68% a day ago, according to the CME FedWatch Tool.

On the US data front, ADP Employment Change in the US climbed by 42,000 in October, compared to the 29,000 decrease (revised from -32,000) seen in September. This figure came in better than the estimations of 25,000. US ISM Services PMI climbed to 52.4 in October, from 50.0 prior and exceeding analysts’ forecasts of 50.8.