GBP/USD Price Forecast - GBP at 1.3556 Holds Firm as Fed Cuts Fuel Bullish Pound Outlook

GBP/USD Holds Near 1.3560 as Fed and BoE Diverge on Policy

The pound is trading at 1.3556 against the dollar (GBP/USD) after touching an intraday high of 1.3580, showing resilience even as the U.S. Dollar Index slid to 97.50, breaking below key support levels. The Federal Reserve is expected to deliver a 25 bps cut next week, with futures pricing in as much as 75 bps of easing by December 2025, while Deutsche Bank projects three cuts in total this year that would drive the Fed funds rate toward the 3.50–3.75% range. At the same time, the Bank of England has shifted to a cautious stance, keeping rates at 4%, with only two modest cuts projected by the end of 2026 as inflation remains sticky at 3.7%.

UK GDP Data Stalls While Market Eyes BoE’s Next Move

The latest ONS figures confirmed UK GDP stagnated in July at 0.0%, following June’s unexpected 0.4% rise. Quarterly growth slowed to 0.3% in Q2, down from 0.7% in Q1, underscoring the fragile nature of Britain’s recovery. Forecasts for 2025 GDP growth have been revised up only slightly from 1.1% to 1.3%, still leaving the UK in what many describe as a “low-growth trap.” For currency traders, the divergence is clear: if the BoE stays cautious while the Fed accelerates cuts, the yield differential could tilt in sterling’s favor, giving GBP/USD more upside momentum.

U.S. Inflation and Labor Market Data Steer Fed Expectations

The U.S. CPI rose 0.4% in August, above the expected 0.3%, while annual inflation held at 2.9%. Producer prices also confirmed steady inflation pressures. Yet unemployment claims spiked to 263,000, far above the forecast 235,000 and up from 236,000 the week before, signaling cracks in the labor market. The University of Michigan’s consumer sentiment index fell from 58.2 to 55.4, the weakest since June, while one-year inflation expectations rose from 3.5% to 3.9%. This mix of soft employment and slowing sentiment has hardened market bets on rate cuts despite lingering inflation, weakening the dollar and giving GBP/USD space to climb above 1.3550.

Technical Landscape Points to 1.3618 Resistance for GBP/USD

The pair trades firmly above the 50-day EMA at 1.3530 and 200-day EMA at 1.3494, both providing strong support for buyers. The hammer candlestick close near resistance suggests bullish intent, with the first upside barrier at 1.3584, followed by 1.3618, and then the year-to-date high at 1.3788. If sterling breaks above 1.3618, momentum could extend toward 1.37+. On the downside, 1.3500 remains critical support, followed by 1.3378, levels that would signal a breakdown if breached. The RSI at 64 supports a bullish bias but is approaching overbought territory, hinting at potential volatility around key data releases.

Macro Forces, Trade Pressures, and Market Positioning

The global backdrop adds another layer of complexity. The U.S. economy faces Trump’s tariff-driven slowdown, with a 50% levy on Indian exports and new restrictions on China and Europe fueling recession concerns. For the UK, bond market risks loom as rising gilt yields push the Treasury toward fiscal restraint ahead of the November budget. Traders remain sensitive to headlines on trade, tariffs, and central bank guidance, all of which play directly into GBP/USD’s direction. Meanwhile, leveraged positioning shows that speculative accounts remain net long GBP, reflecting confidence that policy divergence favors sterling over the dollar in the months ahead.

GBP/USD at 1.3556 is now perched at a critical inflection. Stronger UK GDP prints or firmer BoE language could trigger a breakout above 1.3618, while a weaker U.S. jobs picture would accelerate Fed cuts and weaken the dollar further. Conversely, any surprise from the Fed SEP or a reversal in UK data could send sterling back toward 1.35. Based on the combined macro, technical, and flow dynamics, the bias remains bullish with GBP/USD rated Buy, targeting 1.3680 near term and 1.3788 on breakout confirmation, with downside risk limited to 1.3378 if supports fail.

That's TradingNEWS