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GBP/USD faces pressure as US data and Fed outlook support the dollar

HSBC expects the dollar to strengthen gradually against the pound unless the UK Budget on Oct. 28 delivers a positive surprise.

Reported · Written up by our desk · Major Pairs

HSBC strategists say GBP/USD is under pressure because resilient US data, a more hawkish Federal Reserve, and narrowing UK-US rate differentials are weighing on the British pound. The firm expects the dollar to strengthen gradually against GBP unless the upcoming UK Budget delivers a positive surprise, according to FXStreet.

HSBC also pointed to a relatively weak UK outlook versus the US, noting that GBP was largely unmoved against both the USD and EUR after UK Prime Minister Andy Burnham’s keynote speech to the Labour Party conference on Sep. 29. The speech offered a long term vision for the economy, including regional devolution and energy market reform, but provided little detail on growth or fiscal strategy ahead of the Oct. 28 Budget.

The strategists said the lack of an immediate reaction suggests investors are instead focused on the current drivers of GBP/USD, including resilient US economic data, a more hawkish FOMC, and the narrowing support from UK-US interest rate differentials. They added that GBP/USD has fallen this month to its lowest level since June, with HSBC saying the US side of the equation is doing much of the work.

Latest closeGBP/USD 1.324 ▼0.2%

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