GBP/USD Price Forecast - Pound Stuck Near 1.3380 As Strong US Data And DXY 99.5 Block A Break Above 1.3405

GBP/USD Around 1.3380: Dollar Repricing Fed Cuts Versus Sterling Trying To Hold The Range

US Data, DXY Near 99.5 And The Policy Gap Behind GBP/USD

The key reason GBP/USD is parked around 1.3380 is the shift in expectations around the Federal Reserve, not domestic UK news. US inflation is sticky: headline CPI is running near 2.7% year-on-year, unchanged from the prior month, while PPI has accelerated to roughly 3.0% from 2.8%. The labor market adds to that story, with the latest Nonfarm Payrolls print showing around 215,000 new jobs versus expectations near 180,000, and unemployment at 4.4%, just under the Fed’s 4.5% projection. Weekly jobless claims fell from 207,000 to 198,000, signaling fewer Americans filing for benefits. This mix of steady inflation and resilient employment has forced the market to scale back how much easing it expects from the Fed in 2026. Where traders recently priced around 60 basis points of cuts, they now see closer to 44 basis points for the year. That repricing pushed the US Dollar Index (DXY) higher again, back toward the 99.40–99.50 zone, with the major resistance band still sitting around 100.00–100.20. In that environment, every attempt by GBP/USD to extend above 1.34 smacks into a firmer dollar.

Sterling Fundamentals: UK Growth Surprise Versus BoE Cut Expectations In GBP/USD

On the UK side, the backdrop is mixed but not catastrophic for GBP. Output for November 2025 came in stronger than expected, giving the British economy a modest upside surprise. That has allowed the Pound to outperform the EUR on some crosses. However, rate expectations dominate. Money markets still price at least two 25 bps cuts from the Bank of England during 2026, with implied odds near 90% for a first move by May. So while the UK data is not collapsing, the BoE is still treated as a central bank that will ease, whereas the Fed is being repriced toward fewer and later cuts. That relative policy path outweighs the growth surprise, which is why GBP can gain on the Euro yet fail to gain on the US Dollar.

Spot Behavior: GBP/USD Capped Below 1.3405 And Anchored Around 1.3380

Recent price action in GBP/USD is straightforward. During the latest North American session, the pair printed a high near 1.3413 before sliding back to roughly 1.3380. That leaves spot trading just under the 200-day simple moving average (SMA) at 1.3405, a key trend filter for many participants. On the downside, the pair has been probing the same floor repeatedly, with a four-week low near 1.3360 and a broader support band between approximately 1.3353 and 1.3371. Each bounce from that area has been sold as soon as 1.3400–1.3410 comes into view. In practice, the market is treating 1.34 as a ceiling while the 1.3350–1.3370 region acts as a near-term floor, leaving GBP/USD boxed in a tight range below its 200-day average.

Technical Structure In GBP/USD: Broken Trendline, Falling Wedge And Key Levels

Technically, GBP/USD has shifted from a constructive bias to a more cautious one. From late-November lows, the pair had respected a rising support line that defined the prior recovery leg. That trendline gave way on 6 January, signaling that buyers were losing control. Since that break, price has been grinding lower inside a falling wedge, a compression pattern that can be bullish but only if price actually breaks out. Key downside levels sit just below current spot. Immediate support is the 1.3353–1.3371 band. Further down, the 50-day SMA around 1.3334 is the next technical target, followed by a more significant former swing level at 1.3215, the high from 13 November. Deeper structural trendline support comes into play in the 1.3100–1.3150 zone. On the upside, the sequence is equally clear: first, GBP/USD needs to reclaim 1.3400 and close decisively above the 200-day SMA at 1.3405. Then it must clear resistance around 1.3450, which would reopen the path toward the psychological 1.3500 handle. Until the pair can sustain trade above 1.3405 and 1.3450, the market will continue to treat this wedge as a consolidation within a dollar-supportive environment rather than a confirmed bullish reversal.

Flow, Positioning And Why Rallies In GBP/USD Are Being Sold

The behavior of GBP/USD around these levels reflects how bigger players are positioned. Repeated failure above 1.3400, in the context of strong US data, invites macro and systematic accounts to sell strength rather than chase it. With the DXY grinding toward 99.50, spot sitting at ~1.3380, and the 200-day SMA overhead at 1.3405, the pair offers a clean technical structure for short setups. Short entries above 1.3380 can be defined with stops beyond 1.3450, a resistance level that, if broken, would question the bearish narrative. On the volatility side, the tone of institutional commentary is consistent with that stance: upside in GBP/USD is still being sold, and options structures favor downside protection or positioning below 1.3300 rather than aggressive topside bets. The absence of a strong volatility spike tells you the market is not pricing a violent sterling squeeze yet; instead, it is comfortable leaning into the policy divergence theme.

Data Risk Ahead: UK Jobs And CPI Versus US Core PCE In GBP/USD

The next decisive moves in GBP/USD will come from the macro calendar rather than from technicals alone. In the UK, the focus is on the labor market, inflation and retail sales over the coming week. A hotter-than-expected inflation print would collide directly with a market that is priced for two BoE cuts in 2026. If UK CPI runs too hot, those expected cuts can be pushed back, front-end gilt yields can jump and GBP/USD can squeeze sharply through 1.3405 toward 1.3450–1.3500. On the US side, the data to watch includes housing numbers and, more importantly, the Core PCE index, the Fed’s preferred measure of inflation. If Core PCE comes in softer than the narrative implied by 2.7% CPI and 3.0% PPI, the roughly 44 bps of priced-in Fed cuts for 2026 could move higher again. That would pull DXY back from the 99.50 area and relieve part of the downside pressure on GBP/USD. The pair is sitting at a technically vulnerable point right as both economies publish data that can reshape rate expectations. That is exactly the setup where FX can overreact to single prints.

Trading View On GBP/USD: Tactical Sell Bias While Below 1.3405

Combining US data strength, BoE easing expectations, the behavior of DXY, the wedge formation and the moving averages leads to a clear stance: GBP/USD carries a tactically bearish bias while it trades below the 200-day SMA. Around 1.3380, with the pair unable to sustain trade above 1.3405, rallies into the 1.3400–1.3450 band remain attractive for shorts, targeting first the 1.3330–1.3340 region near the 50-day SMA and then the 1.3215 area if dollar strength persists and DXY finally breaks the 100.00 barrier. A daily close above 1.3450 would neutralize that bearish view and put 1.3500+ back into play, especially if that break is driven by a strong UK CPI surprise or a weaker-than-expected US Core PCE reading. Until one of those catalysts materializes and price proves it by holding above 1.3450, GBP/USD is best treated as a Sell, with a short-term bearish bias anchored in the policy divergence and confirmed by the technical structure.

That's TradingNEWS