GBP/USD Price Forecast: Pound Sterling at 1.3528 Tests 1.3600 Resistance on Dollar Weakness

GBP/USD Holds Above 1.3500 as Fed Cut Bets Hammer Dollar

The British Pound is regaining momentum against the U.S. Dollar with GBP/USD trading at 1.3528, benefiting from weakness in the greenback as Fed rate cut expectations dominate market pricing. Futures now reflect a 90% chance of a September cut, with odds rising for a potential 50-basis-point move if upcoming nonfarm payrolls disappoint. The U.S. Dollar Index has fallen to 97.70, its lowest in five weeks, and remains under pressure despite July core PCE inflation rising 2.9% year-on-year in line with forecasts. Traders are discounting these numbers, betting that monetary easing is imminent and positioning accordingly. This shift has allowed sterling to capitalize, even as UK fiscal risks remain in the background.

Bank of England’s Cautious Stance Supports Sterling

The Bank of England has been signaling a firmer stance on inflation, with MPC member Catherine Mann emphasizing that policy rates should stay high to counter persistent price pressures. While markets still price in 25 bps of easing by March 2026, expectations for immediate cuts in September have faded. The BoE is expected to hold rates steady at the September 18 meeting, supporting sterling’s short-term resilience. UK data remains mixed: Nationwide housing prices slipped 0.1% in August, while mortgage approvals improved to 65.35K, suggesting pockets of stability in housing despite higher borrowing costs. The final S&P Global Manufacturing PMI at 47.0 confirms that growth remains under pressure, but overall conditions are not deteriorating sharply enough to justify rapid policy easing.

Technical Setup: 1.3600 as Key Resistance for GBP/USD

On the charts, GBP/USD is supported by both the 50-day EMA at 1.3488 and the 200-day EMA at 1.3467, reinforcing a bullish structure as long as the pair holds above these levels. The RSI at 59 suggests healthy buying momentum without being overstretched, while the MACD is flat but holding positive. Immediate resistance emerges at 1.3594, with a breakout opening the door toward 1.3670. A decisive breach of the 1.3600–1.3605 zone would also expose June highs at 1.3632 and July’s peak at 1.3788. On the downside, first support sits at 1.3427, followed by deeper levels at 1.3372 and 1.3313. The 1.3400 region remains the critical floor for bulls to defend.

U.S. Data and Fed Policy Drive Short-Term Dollar Moves

The U.S. economy grew at 3.3% in Q2, beating expectations of 3.1%, and unemployment claims have come in lower than forecast. Yet despite this positive data, Fed officials have openly struck a dovish tone. San Francisco Fed President Mary Daly stressed that tariff-driven inflation is temporary and reiterated policymakers’ readiness to cut rates. The U.S. court ruling against broad Trump-era tariffs has added another layer of uncertainty to trade policy, amplifying dollar weakness. For sterling traders, the divergence between a Fed willing to ease and a BoE still warning about inflation is widening the policy gap in favor of the pound.

Sterling Vulnerability from UK Fiscal Concerns

Even with the pound gaining, risks remain tied to domestic fiscal challenges. Rising gilt yields last week drove banking shares lower and reignited fears over the sustainability of UK public finances. Higher yields often bolster currencies, but in this case, concerns that the government’s financial position could worsen are offsetting the support from yields. Market participants will be closely watching Treasury Committee discussions with BoE policymakers this week for hints of any shift in quantitative tightening or fiscal coordination. For now, fiscal strain is a headwind that limits sterling’s upside despite strong dollar weakness.

Market Outlook: Tactical Bullish Bias With Resistance Above 1.3600

With GBP/USD trading at 1.3528 and testing resistance zones, the pair leans bullish but remains capped by the 1.3600–1.3630 region. A clean break above 1.3600 could accelerate gains toward 1.3788 and potentially the 1.3834 zone. Failure here risks sending the pair back to 1.3400 and below. Traders must balance the strong Fed-driven dollar weakness with lingering UK fiscal risks. On balance, the tactical bias is buy on dips above 1.3427 support, but caution remains warranted given the heavy resistance above 1.3600.

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