GBP/USD (1.3400) Rejected at 1.3410 for a 2nd Day as UK Inflation Hits a 12-Month High — Budget and Fed Set the Break

GBP/USD traded at 1.3400 at 15:47 UTC on Wednesday, October 21, 2026, broadly unchanged on the session after a volatile reaction to UK inflation data. The pair dropped to a session low of 1.3364 shortly after the 06:00 UTC release, recovered to 1.3375 within the hour, climbed to 1.3395 by the late European morning, and has spent the U.S. session pinned against the 1.3400 to 1.3410 band. Sterling failed to find acceptance above 1.3400 on Tuesday as well, which makes Wednesday the second straight day of rejection at the same ceiling.

The data should have lifted the pound. The Office for National Statistics reported that UK consumer prices rose 3.5% in the 12 months to September, up from 3.1% in August and above the 3.4% consensus. That is the highest annual rate since October 2025. Core inflation, which strips out energy, food, alcohol and tobacco, rose to 2.8% from 2.6%, beating the 2.7% forecast. Services inflation, the measure the Bank of England watches most closely for domestic price pressure, jumped to 3.7% from 3.4%, above the 3.6% forecast. Monthly CPI rose 0.4%, against a 0.3% expectation.

The pound’s flat reaction tells the story. Markets already priced a 90% to 95% probability that the Bank of England raises Bank Rate to 4.00% from 3.75% on November 5. A hot CPI print confirms that hike rather than adding a new one, and the currency had already rallied 263 pips from its 2026 low of 1.3137 on October 14 in anticipation. With the hike in the price, the inflation data had nowhere to push sterling except through a ceiling that sellers defended.

This forecast runs on a single thesis. Sterling has the strongest near-term rate story among the major currencies, with the Bank of England set to hike on November 5, five weeks before the Fed’s priced December move. That sequencing supports GBP/USD on dips. But the hike is fully priced, UK public debt has passed £3 trillion with a Budget due October 28, and the dollar retains safe-haven demand from the Iran war. Until the October 28 Budget and the Fed decision the same day clear, GBP/USD is likely to trade between 1.3300 and 1.3450, with a break above 1.3410 needed to open 1.3500.

Other factors weighed on the session. September public borrowing came in above forecasts, pushing UK national debt past £3 trillion. The dollar recovered part of its recent losses as geopolitical tensions in the Gulf revived safe-haven demand, with the dollar index at 101.76 after touching 101.50 on Tuesday.

UK CPI Breakdown: Motor Fuels Up 29.8%, Services at 3.7%

The September inflation report showed a broadening of price pressure beyond energy. Headline CPI at 3.5% sits 1.5 percentage points above the Bank of England’s 2% target. The annual rate has climbed 0.6 percentage points in two months, from 2.9% in July to 3.1% in August and 3.5% in September. The UK’s 3.5% rate now exceeds France at 3.4% and Germany at 3.3%.

Transport made the largest upward contribution to the change in the annual rate. Transport prices rose 6.6% from a year earlier, up from 4.6% in August. Within that, motor fuels rose 29.8% year over year, up from 23.0% in August and the fastest pace since August 2022. Diesel hit its highest level since 2022. Energy inflation overall reached 17.9%, up from 13.8% in August. Those increases trace directly to the oil shock from the Iran war, with Brent crude trading near $110 a barrel and global freight costs above $20 per barrel.

The more important signal for the Bank of England is outside energy. Core CPI at 2.8% shows price pressure spreading into goods and services that are not directly tied to oil. Goods inflation reached its highest annual rate since September 2023. Services inflation at 3.7% marks a meaningful jump from 3.4%, and services prices are driven mainly by domestic wages and demand rather than imported costs. A rise in services inflation is evidence of second-round effects, where higher energy costs feed through into wages and service prices.

Other categories were steadier. Food inflation held at 1.3%, unchanged from August. Rent inflation held at 4.2%. The monthly rise of 0.4% in September compares with little change in September 2025, which pushed the annual rate higher through a base effect as well as through new price increases.

Bank of England policymaker Megan Greene warned on Tuesday of upside inflation risks, citing stalled wage disinflation and the possibility that second-round effects could start materializing. The September services print supports that warning. Governor Andrew Bailey had earlier said there was little evidence yet of inflation becoming embedded in UK wages and prices. The 3.7% services reading and 2.8% core rate make that harder to argue.

For sterling, the composition of the inflation print matters more than the headline. A rise driven only by fuel would let the Bank of England look through it as a temporary shock. A rise in services and core shows the shock is broadening, which justifies not just a November hike but potentially further tightening into 2027. That second implication is where sterling’s next leg would come from, if markets begin pricing more than one hike.

Bank of England: 3.75% Since December 2025, a 6–3 Vote in September

The Bank of England has held Bank Rate at 3.75% since December 2025, when the Monetary Policy Committee cut by 25 basis points on a narrow 5–4 vote. Through 2026, the committee has drifted toward tightening as the oil shock pushed inflation higher. In April, the MPC voted 8–1 to hold, with one member dissenting in favor of a hike to 4.00% on the risk of energy-price second-round effects. On September 17, the committee voted 6–3 to hold, with three members voting to raise Bank Rate to 4.00%.

The next decision lands on Thursday, November 5, at 12:00 London time, alongside the November Monetary Policy Report. That report is one of four annual forecast rounds and will include updated projections for inflation and growth. Market pricing from overnight index swaps implies a 90% probability of a hike to 4.00%, with a market-implied move of 23 basis points. Prediction markets put the odds of a 25-basis-point increase at 93.5% to 94%. In an October poll, 54 of 63 economists expected the Bank to raise rates to 4.00% on November 5.

Markets have priced more than one move. Expectations for four 25-basis-point hikes by June 2027 had built up before easing slightly, and Chief Economist Huw Pill, one of the most hawkish policymakers, has expressed skepticism about pricing four increases over the coming year. Some forecasters now expect hikes in November and February, which would take Bank Rate to 4.25%. The final 2026 meeting falls on December 17.

The September vote split shows the committee has already moved. Three members voted for a hike when inflation stood at 3.1% in August. With inflation at 3.5%, core at 2.8% and services at 3.7%, it takes only two more votes to produce a majority for 4.00%. The September CPI release gives the swing voters the data they needed.

For sterling, the Bank of England’s path is the strongest support in the near term. A hike on November 5 would make the BoE the first of the three major Western central banks to move in the current round. The Fed is priced to hold on October 28 and hike in December. The European Central Bank is priced to hold on October 29 and hike in December. A BoE that moves five to six weeks earlier and signals more tightening would widen the rate gap in sterling’s favor during November.

The risk is that the hike is already priced. With 90% to 95% odds, a November move adds nothing new for currency markets. What would move sterling is guidance in the November Monetary Policy Report: a projection showing inflation above target into 2028 would support more hikes and a stronger pound, while a projection that inflation peaks soon would cap the move.

Gilts: 10-Year Near 5.40%, a Premium Over Treasuries

UK government bond yields reflect both the rate outlook and the fiscal strain. The 10-year gilt yield has traded between 5.38% and 5.44% this month, close to multi-year highs. It fell below 5.40% at points as traders pared back expectations for the number of Bank of England hikes, and edged back toward 5.40% as unrest in France lifted concerns about European fiscal outlooks. The four-year gilt yield rose to 4.945% after an auction drew a bid-to-cover ratio of 3.415, showing strong demand despite higher yields.

The gilt premium over U.S. Treasuries is a key input for GBP/USD. With the U.S. 10-year Treasury yield at 5.12%, the UK 10-year gilt trades 26 to 32 basis points higher. That positive spread normally supports sterling, because it gives global investors a higher return for holding UK government debt. But the spread in this case reflects both higher expected rates and a fiscal risk premium, and the second component offsets part of the currency support.

Fiscal risk is visible in Wednesday’s borrowing data. September public sector borrowing came in above forecasts, and UK national debt surpassed £3 trillion. That milestone arrives a week before Chancellor John Healey presents his first Budget on October 28. Rising inflation complicates the Budget, because higher prices increase the cost of index-linked debt and benefits, while the pressure to tighten fiscal policy grows as debt rises.

The gilt market’s sensitivity to fiscal news has history. Sterling and gilts sold off sharply in past fiscal episodes when markets doubted the government’s commitment to debt sustainability. The current setup is calmer, but the combination of a rising deficit, an imminent Budget and inflation running at 3.5% means gilts are vulnerable to a negative surprise on October 28.

Gilts and French bonds have moved together this month. The French 10-year yield broke above 5% on Wednesday for the first time since 2002, and its spread over German Bunds widened to 160 basis points. UK gilt yields edged higher alongside, as investors priced fiscal risk across European sovereign debt. The UK is not in the same position as France, with no political crisis of comparable scale, but gilts are not immune to a broader repricing of sovereign risk in Europe.

For GBP/USD, the gilt picture is a two-sided input. Higher yields on rate expectations support the pound. Higher yields on fiscal fears weigh on it. Wednesday’s flat reaction suggests the two forces are balanced for now. The October 28 Budget will decide which one wins.

The Fed Side: 16% for October, 89% to 94% for December

The dollar side of the pair is driven by the Federal Reserve and the oil shock. The Fed’s funds rate stands at 3.75% to 4.00% after a September hike. Futures price a 16% probability of a hike at the October 27 to 28 meeting and an 89% to 94% probability in December. U.S. consumer prices rose 3.7% in September, above the 3.6% estimate. The 10-year Treasury yield sits at 5.12%.

GBP/USD’s 2026 low came on the day of that U.S. inflation report. On October 14, U.S. CPI jumped to 3.7% and pushed October Fed hike odds to near 50%, and sterling fell to 1.3137, its lowest level of the year. The rebound from that low tracked the fading of October Fed hike odds, which dropped below 15% after Fed Chair Kevin Warsh declined to make October the decision point on October 16. The dollar’s own retreat accounted for 70% of the pound’s rebound, and UK data accounted for the rest.

The policy gap between the two central banks is narrow. The Bank of England’s Bank Rate at 3.75% sits at the bottom of the Fed’s 3.75% to 4.00% range. If the BoE hikes to 4.00% on November 5 and the Fed hikes to 4.00% to 4.25% in December, the gap stays roughly unchanged by year-end. What changes is the timing: for five weeks between November 5 and the Fed’s December decision, the BoE will have moved and the Fed will not.

That sequencing gives sterling a window. Currency markets price relative policy paths, and a BoE that hikes first and signals more would shift expectations in sterling’s favor during that window. The question is whether markets price that in advance, as they appear to have done with the 263-pip rally from the October low, or whether the actual hike triggers fresh buying.

The dollar also carries safe-haven demand. The dollar index reached an 18-month high near 103 last week on demand tied to the Iran war and the relative insulation of U.S. energy independence. It has since slipped to 101.76, but geopolitical tensions in the Gulf revived dollar demand on Wednesday and capped sterling’s gains. A major escalation in the Strait of Hormuz would send the dollar higher against every major currency, including the pound.

For GBP/USD, the Fed decision on October 28 lands on the same day as the UK Budget. That coincidence makes October 28 the single most important date for the pair in the next two weeks.

Sterling Versus the Euro: EUR/GBP at 0.8385

The pound has outperformed the euro by a wide margin this month, and the cross rate shows why. With GBP/USD at 1.3400 and EUR/USD at 1.1236, EUR/GBP trades at 0.8385. The euro has been weighed down by France’s fiscal and political crisis, while sterling has drawn support from a Bank of England poised to hike.

The rate outlook favors the pound. The Bank of England is priced to hike on November 5. The European Central Bank holds its deposit rate at 2.50% and is priced at 93% to 97% to hold on October 29, with a hike expected in December. That gives sterling a policy-rate advantage of 125 basis points over the euro today, rising to 150 basis points after a November BoE hike until the ECB follows in December.

France’s crisis has pushed sovereign risk into the euro. The French 10-year yield above 5% and a 160-basis-point spread over Bunds raised the risk premium on euro assets, and French five-year credit default swaps trade at 79 basis points, their highest since 2013. Troops will support police at protests planned for Saturday, and a rating review is due Friday. The UK faces fiscal pressure too, but without a political crisis of that scale.

Inflation is running higher in the UK than in the eurozone’s core. UK CPI at 3.5% compares with France at 3.4% and Germany at 3.3%, although eurozone headline inflation reached 3.8% in September on a 19% rise in energy prices. The UK’s higher core rate of 2.8% and services rate of 3.7% give the BoE more reason to act than the ECB.

EUR/GBP matters for GBP/USD through cross-currency flows. When investors sell euros and buy pounds, they often fund the trade through the dollar, which adds to sterling demand against the dollar as well. A further widening of the French spread or an escalation in Saturday’s protests would push EUR/GBP lower and support GBP/USD at the margin.

The risk to the cross is a UK fiscal surprise. If the October 28 Budget disappoints on debt sustainability, gilts would sell off and sterling would weaken against both the dollar and the euro. Until then, the pound’s relative advantage over the euro is one of the cleaner trends in currency markets this month.

UK Growth and Labour: Data Beats That Built the Hike Case

The inflation print did not land in isolation. UK economic data in October has run hotter than expected across several releases, building the case for a November hike before Wednesday’s CPI.

UK growth unexpectedly beat forecasts earlier in the month, helping sterling recover from its October 14 low. On Tuesday, stronger-than-expected UK labour market data pushed GBP/USD up 0.30% to 1.3348 and reinforced expectations of a November hike. Sterling rose to its highest level in nearly a month on that release. A labour market that keeps adding jobs with inflation at 3.5% is the scenario the Bank of England fears most, because it raises the risk of a wage-price spiral.

Wage data is central to the BoE’s view. Greene flagged stalled wage disinflation on Tuesday, meaning wage growth has stopped slowing toward levels consistent with 2% inflation. Services inflation at 3.7% is the price-side expression of that wage pressure. If wages keep rising at current rates while energy costs push headline inflation higher, the BoE would need to hike more than once to bring inflation back to target.

The growth outlook faces headwinds. Energy costs at 17.9% annual inflation reduce household spending power. Higher interest rates on mortgages and business loans slow investment. Fiscal tightening in the October 28 Budget, if the chancellor raises taxes or cuts spending to stabilize debt, would add another drag. Those forces suggest UK growth could slow into 2027, which would eventually limit how far the BoE can tighten.

For sterling, the growth data creates a timing question. In the near term, strong data supports hikes and a stronger pound. In the medium term, the same hikes could slow the economy enough to cap the tightening cycle. Markets priced four hikes by June 2027 before easing that view, and the gap between those expectations and what the BoE actually delivers will drive sterling through the first half of next year.

The October data has also shifted the BoE’s internal debate. Bailey’s earlier view that inflation was not becoming embedded is harder to sustain after the September CPI. The swing voters on the committee, who held in September, now face a core rate of 2.8% and services at 3.7%, both above where they stood when three of their colleagues voted to hike.

Fiscal Risk: £3 Trillion Debt and the October 28 Budget

The biggest domestic risk to sterling is fiscal. UK national debt surpassed £3 trillion with September’s borrowing data, and the monthly deficit widened beyond forecasts. Chancellor John Healey presents his first Budget on October 28, and rising inflation will be a challenge as he finalizes it.

Inflation hits the public finances through several channels. Index-linked gilts, whose payments rise with inflation, become more expensive to service. Benefits and pensions linked to inflation rise. Higher interest rates on new borrowing raise debt service costs. At the same time, higher nominal growth lifts tax receipts, which partly offsets those costs. The net effect at 3.5% inflation and 5.4% gilt yields is a tighter fiscal position.

Markets will judge the Budget on credibility. A plan that shows a clear path to stabilizing debt, through spending restraint or tax increases, would support gilts and sterling. A plan that relies on optimistic growth assumptions or adds new borrowing would raise the fiscal risk premium, push gilt yields higher on credit concerns rather than rate expectations, and weigh on the pound.

The coincidence of the Budget and the Fed decision on October 28 concentrates risk into a single day. The Budget lands during the London session, and the Fed decision lands at 2:00 p.m. ET, 19:00 London time. A poorly received Budget followed by a hawkish Fed would be the worst combination for GBP/USD and could push the pair toward its 2026 low. A well-received Budget followed by a Fed that frames December as the last hike would be the best combination and could carry the pair through 1.3500.

Fiscal policy also affects the BoE. A tighter Budget that slows growth would reduce the need for monetary tightening, which could soften rate expectations and weigh on sterling. A looser Budget that adds to demand would increase the need for BoE hikes and support sterling on rate grounds, while raising fiscal risk. The interaction between the two policies is why the November 5 Monetary Policy Report, which will incorporate the Budget, matters so much.

For now, sterling is pricing a credible Budget. Wednesday’s flat reaction to higher borrowing suggests markets have not added a significant fiscal premium. That leaves room for a negative surprise to move the pound sharply.

Oil and Geopolitics: The Dollar’s Safe-Haven Bid

The Iran war shapes GBP/USD through oil and through the dollar’s safe-haven role. Brent crude traded at $109.04 on Wednesday after spiking to $110.85, and hit a five-month high of $111.99 on Tuesday. Attacks on shipping in and around the Strait of Hormuz reached 23 in October through the 20th, the highest monthly count since the war began on February 28. Iran said Wednesday there would be no talks with Washington until its demands were met.

Oil feeds directly into UK inflation. Motor fuels rose 29.8% year over year in September, and energy inflation reached 17.9%. The UK imports most of its energy, which means higher oil prices worsen its trade balance and transfer income abroad. That is a structural negative for sterling that offsets part of the rate support from BoE hikes.

The dollar benefits from the same shock. The U.S. is a net energy exporter, and higher oil prices improve its terms of trade even as they lift inflation. During periods of escalation, investors buy dollars as a safe haven, and Wednesday’s recovery in dollar demand on Gulf tensions capped sterling’s post-CPI gains. The dollar index rose back toward 101.80 after touching 101.50 on Tuesday.

A diplomatic breakthrough would reverse those effects. If mediation through Pakistan or Qatar produced a deal that reopened Hormuz, Brent could fall toward $95 to $100, UK energy inflation would ease, and the dollar’s safe-haven premium would fade. GBP/USD would gain on both counts and could move toward 1.3600.

An escalation would do the opposite. A major tanker loss or a confirmed closure of the U.S.-escorted route through Hormuz would push Brent above $112, add to UK inflation, and drive safe-haven dollar buying. GBP/USD would likely fall toward 1.3300 or below, even with a BoE hike priced.

The oil channel creates an uncomfortable trade-off for sterling. Higher oil raises UK inflation, which supports BoE hikes and the pound, but it also strengthens the dollar and weakens the UK trade balance, which weigh on the pound. Wednesday’s session showed those forces netting to zero, with sterling flat despite a hot CPI print.

Technical Levels: 1.3404 to 1.3410 Ceiling, 1.3353 Support

The level map around 1.3400 is defined by Tuesday’s and Wednesday’s rejections. Resistance sits at 1.3404 to 1.3410, where sterling failed to find acceptance on Tuesday and stalled again on Wednesday. A daily close above 1.3410 would confirm a breakout from the October range and open 1.3450, then 1.3500. Above that, 1.3600 is the next round number, and the 2026 high near 1.3858 is the ceiling for the year.

Support starts at 1.3375, the level sterling recovered to after the post-CPI dip. Below it, 1.3364 is Wednesday’s session low. The 1.3353 level is the first significant support on the hourly chart, where buyers have defended through the post-CPI volatility. The 1.3348 area marks Tuesday’s post-labour-data level. Below that, 1.3302 is the next support, and a break below it would open 1.3239. The 1.3137 level is the 2026 low set on October 14.

The October 16 high at 1.3372 marked the top of the post-U.S.-CPI rebound and has since been surpassed, which turns it into support. GBP/USD has gained 263 pips, or 2.0%, from the 1.3137 low to 1.3400.

Distances from 1.3400 define the risk. The ceiling at 1.3410 sits 10 pips above. The 1.3500 target sits 100 pips above, a 0.7% gain, and 1.3600 sits 200 pips above, a 1.5% gain. On the downside, 1.3353 sits 47 pips below, 1.3302 sits 98 pips below, a 0.7% decline, and the 1.3137 low sits 263 pips below, a 2.0% decline.

The broader trend is mixed. GBP/USD is up 0.19% over the past month and 0.11% over the past year, essentially flat on both timeframes. The pair trades 3.3% below its 2026 high of 1.3858, set earlier in the year before the oil shock pushed the dollar higher. Momentum has improved since the October 14 low, with a five-wave advance from that low now complete on some wave counts, which often precedes a pullback.

The pattern of two rejections at 1.3404 to 1.3410 suggests sellers are active at the ceiling. A third test that fails would increase the odds of a pullback toward 1.3300. A third test that breaks would confirm the uptrend from the October low and target 1.3500.

Catalysts: Bailey Today, Budget and Fed October 28, BoE November 5

The next two weeks bring the events that will decide whether GBP/USD breaks its range. Bank of England Governor Andrew Bailey speaks Wednesday afternoon, and his response to the September CPI will set the tone for November. If Bailey acknowledges broadening inflation and signals support for a hike, sterling could test 1.3410 again. If he repeats that inflation is not yet embedded, he would soften expectations for hikes beyond November.

Thursday brings U.S. weekly jobless claims and Friday brings U.S. flash PMIs and the University of Michigan consumer survey. UK flash PMIs are also due, and they will show whether the inflation pressure is accompanied by slowing activity.

October 28 is the decisive day. The UK Budget lands during the London session, and the Fed decision follows at 2:00 p.m. ET. Those two events together will set the fiscal and monetary backdrop for sterling into November. The ECB decides on October 29, and U.S. September PCE inflation lands the same morning.

November 5 brings the Bank of England decision and the November Monetary Policy Report. A hike to 4.00% is priced at 90% to 95%. The vote split, the guidance on further hikes and the updated inflation projections will drive sterling more than the decision itself. A 9–0 or 8–1 vote for a hike with projections showing inflation above target into 2028 would support further gains. A 5–4 vote with projections showing inflation peaking in early 2027 would cap them. U.S. payrolls follow on November 6.

The geopolitical calendar runs alongside. Hormuz incidents, mediation through Pakistan and Qatar, and oil prices will drive the dollar’s safe-haven bid throughout. Saturday brings protests in France with troops supporting police, which could affect euro-sterling flows.

The catalyst sequence means GBP/USD will face three major tests in 15 days: Bailey today, the Budget-Fed double on October 28, and the BoE on November 5.

Forecast Scenarios: 1.3300–1.3450 Base, 1.3600 Upside, 1.3137 Downside

The base case through the October 28 Budget and Fed decision is a range between 1.3300 and 1.3450. The Bank of England’s priced November hike supports sterling on dips toward 1.3300 to 1.3353. The fully priced nature of that hike, the £3 trillion debt milestone ahead of the Budget, and the dollar’s safe-haven demand cap rallies at 1.3404 to 1.3450. Within that range, the higher lows since October 14 favor tests of the upper half, but two rejections at 1.3410 show sellers active at the top.

The bullish scenario needs the October 28 double to go sterling’s way. A Budget that convinces markets on debt sustainability would remove the fiscal risk premium from gilts and the pound. A Fed press conference that frames December as the last hike of the cycle would weaken the dollar. With both in place, GBP/USD breaks 1.3410, targets 1.3500, 0.7% higher, and extends toward 1.3600, 1.5% higher, into the November 5 BoE decision. A hawkish BoE on November 5, with guidance pointing to further hikes into 2027, could carry the pair toward 1.3700. A diplomatic breakthrough on Iran that sends Brent below $100 would add another tailwind.

The bearish scenario starts with a fiscal surprise. A Budget that raises borrowing or relies on optimistic assumptions would push gilt yields higher on credit concerns and weaken sterling. A hawkish Fed on the same day would strengthen the dollar. GBP/USD would break 1.3353 and 1.3302, then target 1.3239, 1.2% below current levels, and the 2026 low at 1.3137, 2.0% lower. A Hormuz escalation that drives Brent above $112 would deepen the move through dollar safe-haven demand. A BoE that delivers a dovish hike, with a split vote and guidance that November is the last move, would add pressure after November 5.

The probability weighting favors the range into October 28, with an upward bias afterward if the Budget is credible. The BoE’s first-mover advantage over the Fed gives sterling a structural edge in November, but that edge is already partly in the price after the 263-pip rally from the October low.

Verdict: Neutral-to-Bullish Below 1.3410, Bullish Above

GBP/USD at 1.3400 is neutral-to-bullish, with a confirmed bullish turn only on a daily close above 1.3410. The September inflation data gave the Bank of England every reason to hike on November 5: headline CPI at 3.5% against a 3.4% forecast, core at 2.8% against 2.7%, services at 3.7% against 3.6%, and motor fuels up 29.8%. The September vote was already 6–3, and two more votes produce a majority for 4.00%. A November hike would put the BoE five weeks ahead of the Fed’s priced December move.

The constraints on sterling are equally clear. The hike is 90% to 95% priced, which is why the pound went nowhere after a hot CPI print and failed at 1.3404 to 1.3410 for a second straight day. UK national debt passed £3 trillion with September borrowing above forecasts, and the October 28 Budget will test fiscal credibility. Gilts at 5.38% to 5.44% carry a fiscal component alongside the rate component. The dollar retains safe-haven demand from the Iran war, with Brent near $110 and Hormuz attacks at a wartime high.

Against the euro, sterling’s position is strong. EUR/GBP at 0.8385 reflects a BoE poised to hike against an ECB holding at 2.50%, and a UK without France’s political crisis. That relative strength supports GBP/USD through cross-currency flows.

The levels decide the call. A daily close above 1.3410 opens 1.3500 and 1.3600. A daily close below 1.3353 opens 1.3302 and 1.3239. Between those levels, the range holds into October 28, when the Budget and the Fed decision land on the same day and set the path for the November 5 Bank of England decision.

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