The Bank of England's rising expectations of interest rate cuts in December combined with the rebound of the US dollar, and the British pound fell back in shock against the US dollar

Huitong Financial APP News-Recently, the market has turned to dovish policy prospects for the Bank of England. Major institutions including Morgan Stanley, Citigroup and UBS Global Research all expect BoE to cut interest rates by 25 basis points in December to cope with the economic slowdown and the gradual easing of inflationary pressures.
Morgan Stanley pointed out in the report: "As inflation in the UK continues to fall and wage growth stabilizes, the central bank's precautionary interest rate cut at the end of the year will help maintain economic resilience."
However, BoE's internal views remain divided. Bank of England official Megan Greene said: "I don't think the current UK monetary policy has reached a substantial tightening level. Wage growth expectations remain above ideal, and the stubborn nature of inflation means policy formulation still needs to be cautious."
She emphasized that risk management around inflation should become an important consideration in monetary policy formulation. The remarks weakened the market's confidence in an immediate interest rate cut to a certain extent, but the overall dovish atmosphere still dominates.
The US dollar is supported by expectations of a government restart. Weak ADP data limits the increase in the US dollar. Expectations of an end to the US government shutdown have brought a short-term boost.
The U.S. Senate has passed a bill, and the House of Representatives is expected to vote on Wednesday. If signed, it will end the longest government shutdown in history and resume the normal pace of economic data release.
At the same time, the weak ADP jobs report continues to strengthen the Federal Reserve's expectations for a rate cut in December. Data showed that in the four weeks ended October 25, the U.S. private sector lost an average of 11,250 jobs per week, a significant decrease from the previous 14,250, indicating that the labor market is weak.
According to the CME FedWatch tool, the market has factored in a 68% probability of a rate cut. Although the US dollar has been supported by policy events in the short term, weak economic fundamentals limit its room for further strength.
Judging from the daily chart, GBP/USD continues to be under pressure after falling back from a high of 1.3250 and is currently hovering around 1.3140. Prices were trading below the 20-day moving average and the short-term trend turned bearish.
If the exchange price falls below the 1.3120 support level, it may further test the 1.3050 area; if it can return above 1.3200, it is expected to restart its rebound. In terms of technical indicators, the RSI indicator fell to around 47, indicating that downward momentum is still continuing, but has not yet entered the oversold range.
Overall, short-term bears dominate the market, but if U.S. data continues to be weak,the pound may gain some room for repair.
The current core driver of the pound comes from the divergence of policy expectations: the Bank of England tends to cut interest rates, while the Federal Reserve faces more complex inflationary and growth pressures. If BoE does cut interest rates in December, the pound may be under further pressure in the short term; but if inflation data remains high or policy positions are divided, the pound may experience a technical rebound.
Overall, GBP/USD may remain volatile in the range of 1.3050 - 1.3200 in the short term. The market will pay close attention to UK inflation and employment data to judge the pace of interest rate cuts.