GBP/USD Price Forecast: Sterling at 1.2708 Struggles Against Dollar Strength as Fed Data and NFP Dominate

GBP/USD Under Pressure After Sterling’s 3% September Slide

The GBP/USD pair has endured a heavy September, retreating nearly 3% from highs above 1.31 to trade near 1.27 as of September 28. Sterling’s weakness came as U.K. economic momentum cooled while the U.S. dollar strengthened on robust data. In the past week alone, GBP/USD swung between 1.2630 and 1.2850, with traders watching whether the pair can stabilize before the upcoming U.S. Non-Farm Payrolls release and fresh Bank of England rhetoric.

Key Technical Levels Define Sterling’s Next Move

Price action reveals a fragile structure. Immediate resistance sits at 1.2850, followed by heavier selling pressure near 1.2950. On the downside, the 1.2630 region is critical support, with a break exposing deeper retracement toward 1.2490. Over the past seven days, GBP/USD saw its largest daily move on September 26, when the pound slumped 0.6% or 76 pips, settling at 1.2630. The Relative Strength Index remains neutral around 49, reflecting the lack of directional conviction despite the broader downtrend.

Macro Divergence Between the U.S. and U.K.

The pound’s retreat is linked to diverging macro signals. U.S. GDP growth was revised higher to 3.8% annualized, while the U.K. economy stagnated in Q3, with PMI surveys dipping below 50. At the same time, U.S. Core PCE inflation remains sticky at 2.9%, keeping the Federal Reserve cautious, whereas U.K. inflation cooled toward 3.2%, reducing pressure on the Bank of England to keep rates elevated. Rate differentials now favor the U.S. dollar, pulling capital flows into Treasuries and away from sterling-denominated assets.

Bond Yields and Tariffs Add Extra Dollar Tailwind

U.S. 10-year yields remain anchored above 4.4%, compared with the U.K. gilt yield closer to 3.8%, reinforcing dollar strength. Meanwhile, tariff risks under Trump’s trade agenda weigh further on global sentiment, disproportionately hurting the U.K. economy given its reliance on exports post-Brexit. Canadian and European partners have already raised concerns, adding indirect pressure to GBP/USD as investors demand higher risk premiums for sterling exposure.

Liquidity and Positioning Around GBP/USD

CFTC data shows leveraged funds cutting net long positions on sterling by nearly 12,000 contracts in the past two weeks, flipping positioning closer to neutral after months of bullish exposure. Liquidity in spot markets has thinned, with GBP/USD daily turnover slipping below $290 billion, its weakest since June. This reduction in speculative flows heightens the risk of sharp volatility spikes when major U.S. data hits.

Seasonality and Historical Patterns Point to Weakness

September and October historically deliver poor performance for GBP/USD. Over the past decade, the pound has declined in September in 8 out of 10 years, averaging a 1.9% monthly drop. This year followed the same pattern, with the 3% slide marking the worst September since 2022. Traders are now eyeing whether the historical Q4 recovery for sterling can repeat, but that requires stronger U.K. data and a more dovish Fed backdrop.

Verdict: GBP/USD Faces Bearish Risks Into Q4

With GBP/USD stuck near 1.27, technicals flashing fragile support, and macro divergence widening, the pair remains tilted to the downside. A sustained break under 1.2630 could drag sterling toward 1.2490, while only a decisive push above 1.2950 would reopen bullish momentum. Given the heavy positioning shift, relative rate advantage for the dollar, and U.K. growth softness, the bias leans bearish. My call: GBP/USD is a Sell on rallies toward 1.2850, targeting 1.25 over the next leg lower unless the Fed signals a sharper pivot.