GBP/USD Price Forecast - Pound Tests 1.34 as GBP/USD Traders Brace for FOMC Minutes and BoE Signals

GBP/USD Holds Near 1.34 as Traders Eye FOMC Minutes and Bank of England’s Next Move

The British Pound to U.S. Dollar (GBP/USD) pair traded around 1.3398, slightly below its intraday peak of 1.3422, showing hesitation near key support levels. The pair has oscillated between 1.32 and 1.36 for most of the quarter, with the 1.34 handle emerging as a pivotal battleground between bullish recovery hopes and renewed dollar strength. The recent correction follows a five-week rally that had lifted sterling above 1.36, before renewed buying of the dollar and dovish comments from Bank of England (BoE) policymakers triggered a technical reversal.

Sterling Faces Pressure as Dollar Index Rebounds Above 98.60

The U.S. Dollar Index (DXY) rebounded 0.32% to 98.60, erasing part of last week’s decline and capping sterling’s upside momentum. This move reflects renewed safe-haven demand as investors weigh ongoing political risk in Europe and the U.S. government shutdown extending into its second week. The dollar’s strength continues to weigh across the G10 complex, and the pound — which had outperformed peers such as the CAD, NZD, and AUD — is now consolidating as traders reassess rate expectations.

Momentum indicators reflect this cooling: the RSI at 43.08 sits below neutral, confirming fading bullish energy, while the 15-day moving average (1.3456) has crossed beneath the 20-day (1.3492), signaling a short-term bearish tilt. Price action below 1.35 has now broken the rising channel that defined the August rally, suggesting that the pair may transition toward a sideways or downward trend unless renewed catalysts emerge.

Bank of England Caution Amplifies Sterling’s Uncertainty

The Bank of England remains the key driver of medium-term sterling volatility. Markets now assign an 82% probability of one more rate cut before year-end, as core inflation eased to 2.1%, its lowest since mid-2021. BoE Chief Economist Huw Pill recently signaled that “policy tightening has done its job,” hinting at a pause in rate hikes but warning that elevated wage growth still threatens inflation persistence.

This cautious tone contrasts sharply with the Federal Reserve, where policymakers maintain a neutral-to-hawkish bias. The FOMC minutes from the September 16–17 meeting, due later today, are expected to confirm internal division over the next rate move — but continued restraint in easing expectations could lend the dollar another tailwind. With the Fed funds rate still holding between 4.75%–5.00%, the interest rate differential remains in the dollar’s favor, limiting sterling’s potential for sustained upside.

Technical Structure Points to Potential Pullback Before Recovery

Technically, GBP/USD is retesting a well-defined horizontal support zone between 1.3350–1.3400, a region that has triggered multiple rebounds since late August. If this support gives way, traders anticipate a sharper slide toward 1.3325, the lower boundary of the pair’s three-month range.

On the upside, resistance aligns at 1.3500, corresponding to the cluster of moving averages, followed by the key psychological level at 1.3600. Momentum oscillators remain neutral to slightly bearish, suggesting limited immediate rebound potential. The MACD histogram has flattened near zero, while the RSI remains under 50, indicating that buyers lack conviction. Short-term sentiment favors sell-on-rally positioning until a sustained move above 1.3550 occurs.

Market Sentiment Reflects Broader Dollar Reaccumulation

The broader market narrative supports a more defensive tone. U.S. Treasury yields have stabilized near 4.25%, and risk appetite has cooled after the FOMC’s September minutes revealed concern over financial stability risks if rate cuts occur too soon. Investors are also digesting the U.K. manufacturing PMI, which came in at 49.1, still in contractionary territory, while services PMI eased to 50.4, barely above expansion. Together, these readings confirm that the U.K. economy remains fragile, reducing the BoE’s capacity to maintain a hawkish stance.

Meanwhile, hedge fund positioning shows GBP net longs shrinking by 18% week-over-week, their largest reduction since June. The CFTC data indicates that leveraged funds have begun rotating into dollar positions ahead of the Fed minutes, reinforcing the view that the pound faces limited near-term upside.