Sterling may struggle to extend its recent advance above 1.34 as a trio of risk events — the October 28 Fed decision, the UK Autumn Budget, and the November 5 BoE meeting — test a rally built on widening UK-US rate divergence and sticky UK inflation.

Cable's climb from the October 14 low of 1.3137 to last trading at 1.3374 has come amid data pointing to elevated UK prices and wages and a higher-for-longer BoE path. It has also been helped recently by an unwinding of GBP shorts put on amid recent French fiscal angst.

LSEG's IRPR implies the BoE may hike twice in 2026 against one Fed move, and further out the BoE strip futures currently indicate the BoE hiking by 116bp by the 2027 MPC meeting, versus a scant rise of 68bp for the Fed.

However, the upcoming UK Autumn Budget and central bank decisions introduce an element of uncertainty. While Prime Minister Andy Burnham has committed to current fiscal rules, market skepticism persists given the ongoing impact of inflation on UK households and the government's mandate to address affordability. Fiscal options are limited, and any perceived deviation from fiscal prudence could undermine sterling's strength.

Technically, GBP/USD meets resistance at 1.3406, the bruised 50% Fib of the 1.3675-1.3137 range, and 1.3470, the daily cloud twist. On the downside, bullish momentum wanes on a close below 1.3325, the rising 10-DMA, with bears then eyeing the October 14 French fiscal-related low at 1.3137.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)