The GBP/USD currency pair experienced continued downward momentum on Wednesday, marking its second consecutive daily decline and the ninth out of the last ten sessions. The pair slid to its lowest level in nearly three months during the early European trading hours, reflecting persistent bearish sentiment.
The decline has been largely driven by concerns over the United Kingdom’s fiscal outlook. Recent reports indicate that the UK Office for Budget Responsibility (OBR) is expected to cut its productivity forecasts by approximately 0.3%. This adjustment could potentially increase the fiscal deficit by over £20 billion, adding to fears of mounting fiscal challenges. These developments come ahead of the upcoming Autumn Budget statement from Finance Minister Rachel Reeves scheduled for November 26, and have undermined confidence in the GBP, especially amidst market expectations of further monetary easing.
Market participants are pricing in about a 68% probability that the Bank of England will implement a 25 basis point interest rate cut at its December meeting. Weaker inflation data and deteriorating fiscal conditions are seen as supportive of such a move. Supporting this view, recent data from the British Retail Consortium revealed that food prices fell by 0.4% in October — the largest monthly decline since December 2020 — and overall shop prices decreased for the first time since March. These price reductions, combined with expectations of lower rates, have contributed to a softer GBP.
Meanwhile, the US dollar rallied sharply intraday despite no immediate fundamental catalyst. The move is largely attributed to positioning adjustments ahead of the Federal Reserve’s policy announcement. The Fed is widely expected to lower interest rates by 25 basis points at the conclusion of its two-day meeting, with a strong consensus for additional rate cuts in December. Investors will closely analyze the central bank’s statement and Chair Jerome Powell’s commentary for indications on the future monetary policy outlook, which will influence USD strength and the GBP/USD trajectory.
From a technical standpoint, a key trigger for bearish momentum was the pair’s close below the 1.3300 level. Daily oscillators point to continued downside risk, with a retest of the August low around 1.3140 being a likely near-term target. Conversely, attempted recoveries beyond the 1.3245-1.3250 zone are expected to be limited, as signs of fresh selling may emerge around this area. Any sustained break above near 1.3300 could trigger a short-term rally toward 1.3360 or higher.
