Market Insights > Daily Market Analysis New

7 November 2025,03:30

Daily Market Analysis New

Sterling Struggles as BoE Split Deepens and Growth Fades

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7 November 2025, 03:30

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Key Takeaways:

*BoE Division Deepens: A narrow 5–4 vote to hold rates at 4.0% highlights growing readiness for a potential rate cut.

*Disinflation Gains Traction: Policymakers signal inflation may have peaked, opening the door for future easing.

*Weak Domestic Activity: Construction and civil-engineering PMIs hit multi-year lows, underscoring growth headwinds.

Market Summary:

Sterling continues to navigate a landscape defined by shifting expectations at the Bank of England and weakening data in key segments of the economy. The BoE’s decision to hold the Bank Rate at 4 % in a tight 5-4 vote highlighted the Committee’s deep division and its growing readiness to cut rates if disinflation becomes more convincing. Inflation remains elevated, but policymakers are signalling that the peak may lie behind them.

Domestically, UK activity data are flashing warning signs: for example, construction and civil-engineering PMI readings have hit their weakest in years, and prospects for fiscal-tightening loomed with the upcoming Autumn Budget. These headwinds reinforce sterling’s fragility even as the BoE transitions toward a more dovish posture. Markets are now placing a high probability on a December rate cut which tends to cap upside for GBP unless data surprise on the upside.

Policy divergence is a key theme: while the Fed appears to be laying the groundwork for eventual easing albeit cautiously, the BoE is more definitively in easing mode. That widening yield and policy spread tends to be a headwind for GBP versus USD. Sterling’s near-term trading range is likely to remain sideways to weak, with only a significant upside surprise capable of shifting the narrative.

In this environment, GBP is best regarded as a conditional trade: if UK data show stability and the BoE signals resolute hawkishness, upside opens; otherwise, the bias is toward gradual depreciation as the risk premium accumulates.

Technical Analysis

GBPUSD, H4:

The GBP/USD chart shows the pair staging a short-term rebound after recently finding support near the 1.2900 region which is a level that aligns with its late-May lows. Prior to that, sterling had been under steady pressure, carving out a descending channel characterized by a series of lower highs and lower lows since mid-September.

The latest bounce reflects an attempt to recover from oversold conditions, with price now testing the 1.3220 resistance level. This level coincides with the 50-period moving average, suggesting that any further upside will likely face selling pressure unless bulls manage to break above it decisively.

Momentum indicators support the short-term recovery narrative. The RSI has risen sharply from oversold levels to around 56, indicating improved bullish momentum but not yet overbought. Meanwhile, the MACD has completed a bullish crossover, with widening histogram bars signaling strengthening upside momentum.

Resistance Levels: 1.3220, 1.3480

Support Levels: 1.3025, 1.2875

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