GBP/USD Price Forecast - Pound to Dollar Holds Above 1.3330 as Pound Sterling Eyes 1.3470 Breakout

GBP/USD (Cable) Holds Above 1.3330 as Dual Central Bank Cuts Define December’s Currency Battle

The GBP/USD pair trades around 1.3330, oscillating in a narrow range as traders brace for a historic convergence in monetary policy between the Federal Reserve and the Bank of England. The market has priced in a near-certain 25-basis-point cut by the Fed next week, while expectations for a BoE easing cycle are also firming. This rare alignment—dual rate cuts on both sides of the Atlantic—has left Cable (GBP/USD) in a holding pattern, defying its typical directional bias.

Pound Sterling (GBP) Balances Between UK Easing Bets and Dollar Weakness

After testing 1.3384, its highest level since late October, GBP/USD retreated to 1.3325, consolidating gains from November’s rally. The pair remains resilient despite both central banks shifting toward policy accommodation. The UK Autumn Budget initially boosted optimism, pushing the pound higher as fiscal measures were viewed as growth-supportive. However, economists now see a clear signal that the Bank of England is preparing for its first rate cut since early 2024, with 90% market probability priced in for a 0.25% reduction at the next meeting.

The BoE’s challenge lies in cutting rates without reigniting inflation. The latest CPI reading cooled to 3.9%, down from 4.3% in October, while core inflation slowed to 4.4%. Wage growth has softened to 6.2% YoY, marking the slowest pace in ten months. These trends give policymakers the cover they need to ease, especially as real income pressure lingers. Sterling’s strength against the dollar is therefore being tempered by growing conviction that the UK’s rate cycle has peaked.

US Dollar (USD) Faces Structural Weakness Ahead of Fed Cut

The U.S. Dollar Index (DXY) continues to hover around 98.90, its lowest in five weeks, reflecting broad expectations of a Federal Reserve pivot. Futures markets now assign 89–92% odds of a 25-basis-point cut at the December 10 FOMC meeting, lowering the target range to 3.50%–3.75%. This comes as the Fed grapples with a weakening labor market—Nonfarm Payrolls rose only 85,000 versus the 150,000 forecast—and core PCE inflation cooled to 3.2%, reinforcing the dovish narrative.

Jobless claims improved sharply to 191,000, their lowest since September 2022, but traders have largely dismissed this strength as a lagging indicator, emphasizing instead the downward trajectory in aggregate employment momentum. The U.S. federal shutdown delay in data reporting has left the macro picture incomplete, but traders remain confident that monetary easing is imminent. This structural dollar softness has kept GBP/USD anchored near its upper range despite intermittent pullbacks.

Derivative and Options Flows Reinforce Sterling Upside Bias

Positioning in the options market reveals a growing conviction toward a stronger pound. Traders have accumulated call positions on GBP/USD at strike levels of 1.3400 and 1.3450, with expirations extending into January 2026. The structure indicates expectations for a post-Fed breakout, echoing patterns seen in the 2019 easing cycle, when multiple preemptive rate cuts drove the dollar lower for several months. Implied volatility for the December 10 window has spiked to 10.8%, suggesting traders anticipate a sharp directional move once policy clarity emerges.

Technical Outlook: GBP/USD Builds Support Above 1.3300

From a technical standpoint, GBP/USD (Cable) is consolidating within a rising channel that began in mid-November. Support lies at 1.3287, reinforced by the 20-period moving average, while deeper demand zones sit near 1.3250 and 1.3190, aligning with the 50- and 200-EMAs. The RSI at 55 signals steady momentum, and the MACD remains above zero, confirming underlying bullish bias. Resistance stands at 1.3375, where repeated rejection wicks mark short-term supply. A confirmed close above that level could open the path toward 1.3424 and 1.3470, the next critical thresholds.

Economies.com models show that 1.3350 has acted as a technical ceiling over the past sessions. A breakout would validate the continuation of the bullish corrective structure, supported by trading above the EMA50 and a supportive trendline visible on the short-term chart. Relative strength indicators entering oversold territory suggest momentum may soon rotate back in favor of buyers.

Key Data Drivers: U.S. Inflation and Consumer Sentiment

The next 48 hours will be pivotal for direction. The delayed U.S. PCE Price Index for September is expected to show a further slowdown toward 2.8%, its lowest in over two years. A weaker print could push GBP/USD toward 1.3400, while any surprise uptick could cap gains near 1.3300. The University of Michigan’s Consumer Sentiment Index, forecast at 68.4, will provide a supplementary read on demand-side resilience. A decline below 67 would reinforce Fed easing expectations, amplifying downside pressure on the dollar.

Market Psychology and Historical Parallels

The current market setup mirrors late 2019 conditions, when synchronized global easing produced a three-month rally in GBP/USD from 1.22 to 1.35. The parallels are striking: weakening U.S. job creation, moderating inflation, and preemptive central bank action. This time, however, both the BoE and Fed are easing simultaneously, limiting the relative rate differential impact. Instead, traders are focusing on comparative economic resilience. With the U.K.’s fiscal expansion likely to underpin domestic demand, and the U.S. showing signs of slowdown, relative growth dynamics may still favor the pound over the dollar through early 2026.

Technical Risk: Overbought Structure and Short-Term Volatility

While the medium-term bias is constructive, the short-term setup remains vulnerable. A bearish pin bar candle formed on the 4-hour chart indicates near-term exhaustion. The overbought RSI above 70 earlier in the week has started to normalize, leaving room for shallow retracement before continuation. Failure to hold above 1.3280 could trigger a test of 1.3250, while a breach below 1.3200 would invalidate the bullish setup, exposing 1.3140 as the next critical level.

Outlook: Range Consolidation Before Fed Breakout

As of Friday’s London session, GBP/USD trades at 1.3331, up 0.09% intraday. The 7-session decline in the U.S. Dollar Index has not fully translated into one-to-one Cable strength, underscoring cautious sentiment ahead of the Fed meeting. The pair remains confined within a 1.3280–1.3380 corridor, awaiting a fundamental catalyst. If the Fed confirms dovish language on December 10, GBP/USD could test 1.3450–1.3500, while a hawkish surprise risks a retracement toward 1.3200.

Strategic Bias: Bullish, Targeting 1.3470

Given current positioning, softening U.S. macro data, and the Fed’s near-certain rate cut, the bias for GBP/USD (Cable) remains bullish in the short term. Any pullbacks toward 1.3280 should be viewed as accumulation opportunities, with 1.3470 as the immediate upside target and 1.3600 as the extended resistance into Q1 2026.

The market’s narrative is clear: the U.S. Dollar (USD) is losing policy support faster than the British Pound (GBP), and with traders heavily positioned for dovish confirmation, the reaction to next week’s Fed statement could define the currency’s trajectory into the new year.

Verdict: Buy GBP/USD, targeting 1.3470 short-term and 1.3600 medium-term, while maintaining stop-loss below 1.3200. Momentum remains in Sterling’s favor as rate divergence narrows and Fed easing erodes the dollar’s yield advantage.

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