GBP/USD Price Forecast - Pound Hovers Near 1.3380 As Dollar Strength And Fed Path Challenge Pound Bulls

GBP/USD Under Pressure As Strong USD And Soft BoE Path Drive 1.33 Risk

GBP/USD Price Action: Rejection Above 1.3400, Market Leaning On 1.3360–1.3370 Support

GBP/USD is trading in the 1.3380 area after failing to hold a push to 1.3413 and slipping back below the 200-day SMA at 1.3405. Spot has already printed a four-week low around 1.3366–1.3370 and is now oscillating just above that band, which lines up with short-term support near 1.33612 from the intraday technical map. The broader structure has deteriorated since the rising support line from late November was broken on 6 January; that break turned the previous series of higher lows into a first clear lower low. Price is now capped by a descending trendline, with immediate resistance stacked at 1.34173 and then 1.34939. As long as GBP/USD stays below 1.3400–1.3450 and beneath the 200-day SMA, the market is signalling a shift from a corrective uptrend into a distribution phase where rallies are being sold, not accumulated.

GBP/USD Vs USD Strength: DXY 99.00–100.00 Channel Keeps Sterling On The Back Foot

The US Dollar side of GBP/USD is doing the heavy lifting. The Dollar Index is trading around 99.3–99.5, sitting inside a rising channel on the four-hour chart with support at 99.000 and 98.714 and resistance at 99.745 and 100.024. Price is riding above both short- and long-term moving averages, which confirms underlying bullish momentum for the USD even as the RSI sits neutral rather than overbought. A clean move through 99.745 and into the 100.00 handle would confirm another leg of dollar strength; in that scenario, GBP/USD trading below 1.3360 quickly exposes 1.3334 and then the 1.32–1.33 pocket. Conversely, a decisive drop in DXY below 99.000 would be one of the few credible triggers for a sustained squeeze back toward 1.3450–1.35 in GBP/USD, but current price action does not yet support that reversal.

USD Side Of GBP/USD: 198K Claims, 2.7% CPI And 3.0% PPI Lock In A Later Fed Cut Path

The macro backdrop justifies the stronger dollar. Weekly US initial jobless claims dropped to 198,000, beating the 215,000 forecast and improving from 207,000. That sits comfortably below any stress threshold and confirms that the labour market remains tight, not fragile. December headline CPI is running at 2.7% year-over-year, flat versus November, but producer prices have ticked up to 3.0% from 2.8%. On top of that, regional manufacturing surveys have flipped from contraction to expansion: the New York Empire index jumped to 7.7 from –3.7, while the Philadelphia Fed index surged to 12.6 from –8.8. Unemployment is at 4.4%, better than the Fed’s own 4.5% projection. Taken together, this mix of solid jobs, sticky producer inflation and improving activity gives the Fed no urgency to ease. Fed funds futures now price a 95% probability of no move at the 27–28 January meeting and around 44 bps of cuts for the full year, down from almost 60 bps at the peak. Markets have effectively shifted the first cut toward June and are in the process of questioning whether a second cut even materialises in December. That repricing is pure fuel for the USD leg of GBP/USD and explains why every intraday dollar dip is being bought back near DXY 99.

Policy Stability And Politics: Powell Stays, US–Taiwan Deal And Semiconductors Support USD

The political layer is also dollar-supportive. There was a period of noise around criminal charges and legal scrutiny involving Fed Chair Jerome Powell, but the key market takeaway is simple: President Trump has now confirmed Powell will remain in his role. That removes the tail risk of a forced leadership change at the Fed and anchors expectations around a steady, data-driven policy path. At the same time, a US–Taiwan trade agreement focused on semiconductors and lower tariffs strengthens the US in a strategic industry at exactly the moment global AI and chip demand are accelerating. For GBP/USD, that matters because capital continues to seek USD assets whenever the policy mix looks predictable and growth-positive. Sterling cannot compete on carry or growth momentum as long as the Fed is seen holding rates high into mid-2026 while Washington signs growth-friendly trade deals.

UK Side Of GBP/USD: 0.3% GDP Beat, But “Lukewarm” Growth Keeps BoE Rate Cuts On The Table

On the UK leg of GBP/USD, the data beat is real but not transformative. November GDP grew 0.3% month-on-month after a 0.1% contraction previously and versus 0.1% expected. Manufacturing output rebounded, indicating that the industrial side of the economy is not in free fall, but construction output fell again, underlining how uneven the recovery still is. The tone from domestic economists remains cautious: growth is described as “lukewarm” and “lumpy,” constrained by weak confidence in policy. Markets still price at least two 25-bp Bank of England cuts in 2026 despite the GDP upside surprise. That means the rate-differential story remains negative for GBP/USD: the BoE is expected to ease more than the Fed from here, not less. The short-term reaction function in FX has reflected that: Sterling has outperformed the Euro this week (up around 0.18% versus EUR), but it is slightly weaker against the USD (down around 0.14%), confirming that UK-specific positives are only strong enough to push GBP higher against weaker European peers, not against the dollar.

Upcoming Data For GBP/USD: UK Jobs, CPI, Retail And US Core PCE As Volatility Triggers

The next catalysts for GBP/USD are clustered in the coming week. The UK will release labour market data, inflation numbers and retail sales, giving a fuller picture of whether November’s 0.3% GDP print is the start of a trend or just a noise bump. A softer jobs report, slower wage growth or a downside surprise in CPI would validate current expectations for multiple BoE cuts and would likely push GBP/USD through support at 1.33612 and toward 1.33126. On the US side, housing figures matter at the margin, but the big focus is Core PCE for October and November, the Fed’s preferred inflation gauge, plus the messaging coming from Davos and other policy forums. If Core PCE tracks the PPI move higher, the market will be forced to price even fewer cuts for 2026, which favors fresh USD strength. Only a clear downside shock in US inflation would seriously undermine the dollar and give GBP/USD the air it needs to reclaim and hold above 1.3450.

GBP/USD Technical Structure: 1.3334, 1.3215 And The 1.29 Channel Base As Key Downside Landmarks

Technically, GBP/USD is now aligned with the fundamentals. The break of the rising support line from late November on 6 January marked the end of the prior up-channel. Since then, price has failed repeatedly above the 200-day SMA at 1.3405 and is now producing lower highs and lower lows. The first critical level is the cluster around 1.3360–1.3370, which includes this week’s low near 1.3366 and the short-term support zone highlighted on intraday charts. Beneath that, the next objective is the 50-day SMA around 1.3334, followed by the prior swing high-turned-support near 1.3215 from mid-November. Strategists who track the larger channel see 1.29 as the eventual base if 1.34 is lost on a closing basis: a daily and then weekly close below 1.3400/1.34, combined with this first lower low, is being flagged as a tactical trend change rather than a routine pullback. On the topside, the market would need a sustained recovery above 1.3400, a clean recapture of the 200-day SMA, and then a break through 1.34173 and 1.34939 to argue that the bearish structure has failed. Right now, those levels are resistance zones where sellers are more likely to reload.

Cross-Asset Drivers For GBP/USD: Oil, Risk Sentiment And The Dollar Correlation

The broader risk environment is adding nuance rather than reversing the move. Oil has retreated after no immediate US strike on Iran, with WTI hovering around the high-50s to $60 zone and volatility fading after a geopolitical spike. Some houses argue that lower crude prices can, at the margin, weaken the dollar over time given the evolving correlation between USD and energy. But that linkage is not dominating in the short run. What matters more for GBP/USD right now is the combination of strong US activity data, higher real yields and reduced Fed-cut pricing, which is pushing the dollar higher even as oil drifts. If geopolitical risk reignites and crude spikes sharply, the impact on GBP/USD is two-sided: a sharp risk-off move could still support the USD via safe-haven demand, especially if it triggers another bid in Treasuries and a tightening in global financial conditions. For Sterling, that means any short-term benefit from lower energy import costs is being more than offset by the rate and risk-premium story in favor of the dollar.

Trading Stance On GBP/USD: Bias Bearish, Tactical Sell With 1.32–1.29 In Play

Putting the pieces together, GBP/USD is trading below the 200-day SMA, capped by a descending trendline, sitting just above broken support, and facing a macro mix of stronger US data, later Fed cuts and a BoE that is still expected to ease more aggressively. UK GDP at +0.3% is not bad, but it is nowhere near strong enough to offset a US labour market running at 198K weekly claims and inflation indicators that are refusing to roll over. With DXY holding a rising channel toward 100 and Fed policy repriced to only around 44 bps of easing this year, the balance of probabilities favours further downside in GBP/USD. From a directional standpoint, the pair is a sell, not a buy, with rallies into 1.3417–1.3494 seen as opportunities to establish or add to shorts rather than invitations to chase Sterling higher. As long as GBP/USD remains under 1.3450, the path of least resistance points first toward 1.3334 and 1.3215, and, if the data and Fed pricing continue in the current direction, toward the 1.30–1.29 channel base over the coming legs.

That's TradingNEWS