• GBP/USD holds positive ground around 1.3490 in Thursday’s early European session.
• The pair maintains a constructive outlook above the 100-day SMA, with bullish RSI momentum.
• The immediate resistance level is located at 1.3505; 1.3390 acts as an initial support level.

The GBP/USD pair trades in positive territory near 1.3490 during the early European trading hours on Thursday. The US Dollar (USD) softens against the British Pound (GBP) after the Democrats take control of the US Congress in midterm elections.

The Democrats win a majority in the Senate and House of Representatives, taking control from Republicans. This achieved major victories in several Republican strongholds for the first time in decades, as tens of millions of voters delivered a sharp rebuke to President Donald Trump.

“A lot of the market moves that we’re seeing, particularly in bonds, I think can be traced directly to that, as well as a weaker dollar on the back of lower Treasury yields,” said Ray Attrill, head of FX strategy at National Australia Bank.

The Bank of England (BoE) interest rate decision will be in the spotlight later on Thursday. The UK central bank is likely to raise Bank Rate to 4% at its November policy meeting from 3.75%, according to economists polled by Reuters. This would mark the first increase since August 2023.

Financial markets currently price in at least three quarter-point rate hike for next year, on top of one this month, which would take UK interest rates above those projected for the US.

Pound tracks Euro higher as markets pivot to BoE decision

Strategists at Scotiabank highlight that the Pound is closely mirroring single-currency gains against the Dollar, with “the GBP … pacing the EUR’s gains versus the USD, rising around 0.4% intraday.” They note that the latest activity data offered little fresh impetus, as “final UK Services and Composite PMI data for October were revised slightly lower to 52.8 and 52.9 respectively.” Instead, Scotiabank argues that, “beyond the USD fallout from the mid-terms, GBP attention will quickly shift to tomorrow’s BoE policy decision,” where “a ¼ point hike is all but fully priced in at this point, with swaps anticipating a further 75bps of tightening from the BoE beyond tomorrow over the next year or so.”

Technical Analysis: GBP/USD retains a bullish tone above the 100-day SMA

In the daily chart, GBP/USD maintains a constructive bullish bias as spot holds above the 100-day Simple Moving Average (SMA) and the 20-day Bollinger middle band. Price is pressing the upper half of the recent range, with the upper Bollinger band acting as immediate topside friction, while the Relative Strength Index (14) at about 66 underscores firm positive momentum but hints that the pair is edging toward overbought territory.

On the topside, initial resistance level is located at the upper Bollinger band around 1.3505. A daily close above this barrier would open the way for the July 15 high of 1.3558, en route to the August 25 high of 1.3655.  

On the downside, the meaningful support level is seen at the 100-day SMA at 1.3390, followed by the Bollinger middle band near 1.3345. A break under these levels would weaken the bullish structure and expose the lower limit of Bollinger band close to 1.3185.