GBP/USD slips to around 1.3405 as traders brace for US midterms, a BoE rate hike and September jobs data.

The British pound fell back to roughly 1.3405 against the dollar in early Asian trading on Tuesday, ending a four‑day rally. Market participants are adopting a cautious stance ahead of a packed week that includes the US midterm elections, the Bank of England’s policy decision on Thursday and the release of US September employment figures.

US midterms add political risk

• Analysts expect Democrats to win the House while the Senate outcome remains uncertain, creating divergent scenarios for US fiscal policy.
• If Democrats control both chambers, tighter regulation of artificial‑intelligence technologies could weigh on equity markets.
• A Republican‑led Congress could push further tax cuts or higher defence spending, potentially expanding the federal deficit.

BoE poised for first hike since 2023

• Economists surveyed by Reuters forecast a 25‑basis‑point increase to 4.00% at the November meeting, the first since August 2023.
• Brown Brothers Harriman notes a likely 7‑2 vote split, with two dovish members supporting a hold.
• The central bank’s guidance and the Monetary Policy Report will test market expectations for up to 100 bps of tightening over the next year, which could cap further GBP gains.

What traders are watching next

• Key resistance for GBP/USD around 1.3450 and support near 1.3350.
• US September jobs data due later in the week, which could influence Fed expectations.
• Outcome of the BoE press conference for any hawkish remarks from Governor Andrew Bailey.

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This article is compiled from international market news for information only. It is not investment advice.