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Investing.com -- The recent sell-off in the British GBP/USD might be nearing its end, according to analysts at ING, who caution against chasing further sterling weakness ahead of next week’s Bank of England meeting.
The pound’s recent decline comes as investors anticipate UK Chancellor Rachel Reeves will maintain fiscal discipline in the upcoming November budget, potentially implementing greater fiscal tightening to rebuild budget headroom.
This fiscal stance has led markets to expect the Bank of England will need to lower interest rates earlier to support the economy.
GBP swap rates have moved significantly this month as traders adjust their expectations, now pricing in a BoE terminal rate of 3.25% by summer 2026.
ING analysts note that this repricing of the BoE policy cycle may have gone far enough for now, making it risky to push sterling below key support at 1.3140/50 for GBP/USD or above the 0.8850/70 area for EUR/GBP.
The bank suggests that if the BoE maintains some hawkish language at its upcoming Monetary Policy Committee meeting next week, the pound could actually recover some of its recent losses.