The GBP/USD pair hovered around 1.3220 during the Asian session, reflecting market reassessment of the relative strength between UK fiscal policy and US monetary policy. The release of the UK Autumn Budget has emerged as a key driver supporting the pound's recent stability, while growing expectations of a Fed rate cut in December have significantly limited the dollar's rebound.
**UK Autumn Budget Improves Growth Outlook, but Impact Remains Neutral** UK Chancellor Rachel Reeves unveiled the Autumn Budget, which included tax adjustments, corporate tax structure optimizations, and revisions to certain welfare policies. Markets generally view these measures as providing temporary support.
Following the budget announcement, the UK Office for Budget Responsibility (OBR) revised its growth forecasts: - 2025 GDP growth was raised from 1.0% to 1.5%. - Annual growth projections beyond 2026 were adjusted downward to a range of 1.4%-1.5%.
This "front-loaded" forecast suggests the budget will boost short-term economic activity but will not significantly alter the UK’s medium-to-long-term growth trajectory. The OBR noted that the budget measures would have a "limited but measurable positive effect" on living costs and business activity.
While the pound has gained short-term support, sustained upward momentum will require further macroeconomic data confirming tangible economic improvements.
**Fed Rate Cut Expectations Intensify, Pressuring the Dollar** Unlike the UK’s moderate fiscal stimulus, US monetary policy expectations have shifted notably. Weak US labor market data and slowing business activity have rapidly increased market expectations of a 25-basis-point Fed rate cut in December.
According to the FedWatch tool, the probability of a rate cut has surged to 87%, up from 71% a week earlier. Fed Governor Christopher Waller stated that current data shows sufficient labor market weakness to justify further easing in December. San Francisco Fed President Mary Daly emphasized that recent employment deterioration is "more likely and harder to manage," making rate cuts a prudent move.
Amid these dovish signals, the dollar remains under pressure, serving as a key external factor limiting GBP/USD downside and supporting its strength.
**Short-Term Key Drivers: US ISM Manufacturing PMI and Risk Sentiment** The next market focus will be the upcoming US November ISM Manufacturing PMI. A continued contraction in manufacturing activity could further reinforce rate cut expectations, pushing the dollar lower. Meanwhile, broadly positive global risk sentiment may also favor GBP bulls, keeping the exchange rate above 1.32.
**Technical Outlook** From a daily chart perspective, GBP/USD remains within a medium-term upward channel, with a relatively stable bullish structure. The pair is currently trading above the 20-day and 50-day moving averages, indicating short-term buying momentum.
A critical technical signal is that the exchange rate has repeatedly found support in the 1.3150–1.3180 range, forming a near-term bullish defense zone. A breakout above 1.3300 could open the door for further gains toward the medium-term resistance at 1.3420.
However, if a dollar rebound pushes the pair below this support level, a pullback toward 1.3050 may follow. The RSI remains in neutral-to-strong territory, suggesting the pound retains upward momentum but requires additional macroeconomic confirmation for a sustained breakout.
**Market Perspective** Overall, GBP/USD dynamics reflect a balance between improving UK fiscal expectations and shifting US monetary policy. Short-term support is largely driven by "dollar weakness" rather than "sterling strength."
While further US data weakness could extend GBP/USD gains, the UK’s uncertain growth momentum may introduce volatility risks. The ISM data and actual UK economic performance will determine whether the current trend can extend further.
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