GBP/USD Price Forecast: Holds firm above 1.3350, but remains capped below key moving average
- GBP/USD holds positive ground around 1.3385 in Monday’s early European session.
- The pair keeps a bearish tone below the 100-day SMA; further consolidation cannot be ruled out with neutral RSI momentum.
- The first upside target to watch is 1.3395; the initial support level is seen at 1.3355.
The GBP/USD pair gathers strength to near 1.3385 during the early European trading hours on Monday. A hawkish hike from the Bank of England (BoE) provides some support to the British Pound (GBP) against the US Dollar (USD).
The UK central bank decided to lift its benchmark interest rate by 25 basis points (bps) to 4.00%, marking its first rate increase in over three years. BoE Governor Andrew Bailey emphasized the war in the Middle East, which is pushing up energy prices, as the main factor in deciding future rates.
Bailey added that falling oil prices following the market reacting to the US midterms would not have changed the decision made, but admitted it "obviously" has an impact on his view going forward.
In its BoE forecast for growth and inflation, the central bank revised up its expectations for growth this year and next to 1.6% and 1.3%, stronger than the government's Office for Budget Responsibility projected.
Sterling steadies as BoE hike matches Fed range but inflation risks linger
Analysts at ABN Amro highlight that the BoE delivered another tightening step, raising the bank rate by "25 bps to 4.00%, matching the upper bound of the 3.75-4.00% Fed Funds Rate range." They note that the decision was firmly supported within the committee, with "eight members" backing the move, while "one preferred a 50-bps increase," underscoring a still-hawkish bias.
ABN Amro adds that the MPC "projected inflation to reach around 5% by mid-2027 and signalled another increase unless the Middle East conflict is resolved," suggesting that geopolitical developments remain a key conditional factor in the BoE’s policy path.
BoE’s Pill signals greater rate uncertainty, weighing on Pound outlook
FXS Speechtracker’s 4.2/10 score, well below Pill’s 6.4/10 historic average, points to a more cautious and less conviction-driven message. By stressing that nothing is baked in for interest rates next year and rejecting any preset upward path from spring, the speech marks a dovish shift away from previously implied tightening bias.
The possibility that Bank Rate could stay on hold or even fall if growth stalls, and the focus on margin squeeze as a key determinant, reinforce downside risks for the Pound. This conditional stance ties future policy to corporate pressures and growth dynamics, encouraging markets to pare back expectations for sustained rate hikes and to reassess Pound-supportive carry trades.
Technical Analysis: GBP/USD keeps a bearish vibe under the 100-day SMA
In the daily chart, GBP/USD retains a mildly bearish, capped bias as it holds just beneath the 100-day simple moving average (SMA), with prices still within the upper half of the Bollinger envelope and the 20-day SMA (middle band) offering nearby support. The Relative Strength Index (14) at 52.5 sits close to neutral territory, hinting at consolidative momentum rather than a decisive trend continuation.
On the topside, initial resistance level is defined by the 100-day SMA at 1.3395, with a stronger barrier at the Bollinger upper band near 1.3490. Any follow-through buying above this level could see a rally to the July 15 high of 1.3558.
On the downside, immediate support level emerges at the Bollinger middle band around 1.3355, followed by the October 28 low of 1.3272. A deeper pullback would aim toward the lower limit of Bollinger band near 1.3225.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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