Weekly FX Outlook Q&A After the Bank of England’s Dovish Hold

Q: What’s the latest on the Bank of England and interest rates? 

The Bank of England delivered what markets are calling a “dovish hold.” Rates were left unchanged, but four of the nine MPC members voted for an immediate cut which was a larger split than expected. Understanding what dovish central bank signals mean for currencies helps explain sterling's reaction. That’s strengthened expectations for a December rate cut, now priced at roughly 70% probability. 

Governor Bailey effectively holds the casting vote, but the Bank’s message was clear: growth is soft, the labour market is easing, and inflation has peaked. The path to policy easing remains open.

Q: How did sterling react to the BoE’s dovish tone? 

After an initial dip, sterling rebounded modestly, suggesting the market had already priced in much of the dovishness. Traders are effectively saying: “Yes, cuts are coming, but not quite yet.” 

That reaction tells us two things: 

  

Q: What’s the technical picture for GBP/EUR right now? 

Sterling is attempting a mild corrective recovery after dropping to two-year lows. The pair has since stabilised and is consolidating above a key support level that’s drawn buyers recently. 

From a technical standpoint, the pair is gravitating toward its 21-day moving average (around 1.1415), a level that has capped every rebound since late September. This follows the sharp selloff we analysed when Chancellor Reeves announced tax hikes earlier this month.

Momentum indicators, including RSI, recently showed oversold conditions (around 30), which supports this limited bounce. But this move looks technical, not fundamental. The broader trend remains lower heading into the November 26 Budget, with any rebound likely to fade as fiscal tightening and slower data reinforce sterling’s downtrend. 

Q: What data could shape sterling’s next move? 

Two key releases could decide whether this rebound holds or fails, building on the softer inflation data that opened the door to BoE cuts in the first place: 

A combination of firm data and cautious BoE language could buy sterling some breathing space but without it, further losses are likely into year-end.

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Q: How does this tie into the broader FX landscape? 

Global FX markets are consolidating after a volatile October, but beneath the surface, distinct trends are emerging: 

USD - Supported but contained 

The U.S. dollar remains firm amid safe-haven demand and limited Fed cut expectations. The government shutdown appears close to resolution, which could improve sentiment but leave the dollar well-supported near term. 

EUR - Testing resistance, still rangebound 

EUR/USD rebounded from its April lows but stalled at the 21-day EMA, a level that has capped every rally since September. Unless the pair breaks above this ceiling, the downtrend remains intact, with a slightly surprising slide into the 1.13s still possible. 

JPY - Under pressure 

The yen continues to weaken as the Bank of Japan stays cautious. Intervention risks are rising, but direct action has yet to materialise. 

AUD - Risk-sensitive and rebounding 

The Australian dollar is benefiting from improving global sentiment as U.S. lawmakers move toward ending the shutdown. This risk-on tone could drive GBP/AUD back toward the 2.00 handle, with scope for deeper losses if UK data disappoints. 

CAD - Supported by strong jobs data 

The Canadian dollar has strengthened after blowout employment figures (+66.6K jobs in October) erased expectations for a near-term BoC cut. GBP/CAD’s rebound has faded, capped by the 21-day EMA, with scope to retest 1.8320–1.8230 support in the week ahead. 

NZD - Chronic underperformer 

Despite improving risk appetite, the kiwi remains sluggish. GBP/NZD’s rally has lost steam after seven straight daily gains, suggesting a pullback toward 2.3160 (21-day EMA) before potential renewed upside toward 2.35 if sentiment holds. 

CHF & NOK - Quiet but steady 

The Swiss franc remains mid-range amid calm risk conditions, while the Norwegian krone is buoyed by hotter inflation data that reinforces a prolonged policy pause. 

Overall, the theme is controlled calm and the dollar firm, risk currencies grinding higher, and sterling struggling to gain traction while fiscal uncertainty dominates. 

 

Q: What’s Lamera Capital’s take? 

Sterling’s rebound is tactical, not structural. Fiscal tightening, weaker pay growth, and dovish central bank signals leave the medium-term bias tilted lower but near-term stability is possible if UK data surprises positively. 

For now, GBP/EUR looks set to consolidate between 1.1340 and 1.1410, with similar range-trading likely across GBP pairs until the Budget and December BoE meeting provide clearer direction.  

Q: What should businesses and investors do? 

Lamera Capital strategic View:
Sterling’s weakness has paused, not reversed. A fragile rebound could extend modestly this week, but the broader trend remains soft until fiscal clarity and stronger domestic data emerge. For now, the message is simple: patience, partial hedging, and disciplined timing remain the best approach to managing GBP exposure.
 
For updates on your desired currency pair please reach out to the team at Lamera Capital.