GBP/USD Price Forecast - Pound Slips to 1.3325 as Trump Calms Tariff Fears

GBP/USD (GBPUSD=X) Drops to 1.3325 as Trump Softens Tariff Rhetoric and Traders Await BoE Cues

The British Pound (GBP/USD) slipped to 1.3325, down 0.18%, as the U.S.–China tariff standoff showed signs of cooling and investors turned focus toward the Bank of England’s next move. President Donald Trump’s reassurance that “China will be fine” sparked a mild rebound in global sentiment after last week’s turmoil that wiped nearly 4% off oil and triggered sharp currency swings across the majors. The pair’s retreat from 1.3366 underscores persistent caution ahead of key UK labor market and GDP data expected later this week.

Trade Rhetoric and Market Relief Keep GBP/USD Volatile

The week began with a fragile calm after Trump eased concerns about the 100% tariff escalation he threatened for November 1. His statements that the U.S. “wants to help China, not hurt it” shifted the market tone, pulling safe-haven flows out of the dollar and restoring a partial risk appetite. The U.S. Dollar Index (DXY) hovered near 99.00, capping its rally from last week as traders digested remarks from both Trump and Treasury Secretary Scott Bessent, who confirmed the APEC meeting with President Xi Jinping in South Korea remains on schedule.

Still, volatility persists across major FX pairs. The pound’s early gains faded quickly as traders used the rebound to reestablish dollar longs. With U.S. consumer sentiment showing resilience at 55.0 and inflation expectations steady near 4.6%, macro data continues to provide modest support for the dollar even as rate-cut bets rise. Markets now price a 97% chance of a 25-basis-point Fed cut in October, limiting further upside in the greenback but keeping the broader tone cautious.

Bank of England Outlook and Domestic Data Under Scrutiny

In the UK, attention has shifted toward the Autumn Budget, alongside a dense lineup of BoE speakers. Six of the nine Monetary Policy Committee (MPC) members are set to speak this week, offering fresh insight into rate trajectories. The market consensus expects the BoE to hold rates at 4.75%, while money markets project the first cut by March 2026, assuming inflation continues its gradual descent from 2.8% toward target.

Investors are also watching the UK GDP and jobs data for August, which will determine whether the economy’s modest summer rebound can be sustained. Any weakness could accelerate dovish expectations and push GBP/USD toward key support at 1.3300, with further downside toward 1.3200 and the 200-day SMA at 1.3173.

Technical Outlook: Sterling Still Trapped Below Major Averages

The technical structure remains heavy. GBP/USD trades below its 20-, 50-, and 100-day moving averages, signaling that bears still control the short- to medium-term direction. The RSI trends downward near 41, confirming a lack of bullish momentum. A decisive move below 1.3300 could expose the 1.3200–1.3170 zone, where deeper losses may stall.

On the upside, immediate resistance stands near 1.3400, followed by the 20-day SMA at 1.3451, 50-day at 1.3472, and 100-day at 1.3490. Traders view any rebound toward these levels as a shorting opportunity rather than a trend reversal. Only a sustained break above 1.3490 would signal a potential shift in market structure, but with fundamentals still skewed toward dollar resilience, the path of least resistance remains lower.

Macro Divergence Between Fed and BoE Narrows

While both central banks are approaching the end of their tightening cycles, the divergence in timing defines the current range. The Fed’s expected October and December cuts contrast with the BoE’s “higher for longer” tone. Yet the difference is narrowing, as soft UK growth indicators suggest policymakers may not maintain elevated rates for long.

The U.S. government shutdown, now entering its third week, adds uncertainty but has not derailed the dollar’s safe-haven bid. Fiscal strain and partisan deadlock continue to weigh on investor sentiment, but the greenback remains supported by relatively stable macro performance and subdued unemployment.

Market Sentiment and Positioning

Positioning data shows speculative accounts maintaining moderate sterling longs, betting that UK yields will stay attractive relative to the euro. However, recent dollar strength—driven by a more stable DXY and easing geopolitical tensions—has capped further pound appreciation.

Currency heat maps reflect this dynamic: the GBP has weakened 0.87% against the USD this month, while outperforming the JPY (+2.13%) and staying flat against EUR (+0.59%). The AUD and NZD lag behind, reflecting global risk fatigue and commodity-linked weakness.

Key Events Driving GBP/USD This Week

Markets are bracing for a heavy macro calendar:
– BoE Governor speeches throughout the week
– UK Labor market and GDP data (Aug)
– U.S. CPI and retail sales data
– APEC Summit (Trump–Xi meeting expected)

Each event could sharply shift sentiment as traders reassess inflation paths and growth differentials between the UK and U.S. A hawkish BoE tone could anchor GBP/USD above 1.3330, while softer rhetoric or weak GDP prints may send the pair back below 1.3250.

Verdict: Cautious Bearish Bias Until 1.3400 Breaks

Given the macro backdrop, GBP/USD remains in a short-term bearish bias, holding within a 1.3290–1.3390 range. The dollar’s underlying strength, bolstered by relative U.S. economic stability and fading tariff fears, continues to weigh on sterling. Unless the BoE delivers a clear policy surprise or U.S. data underwhelms, any rallies are likely to fade before testing 1.3400 resistance.

Verdict: Hold with a bearish tilt, targeting 1.3200 on weakness and considering reversal opportunities only above 1.3450 if BoE commentary turns decisively hawkish.

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