GBP/USD Price Forecast - Sterling Sinks to $1.3430 as Fed Cut Odds Hit 88% and Shutdown Fears Pressure Sterling

GBP/USD Price Forecast – Pound Slides to $1.3430 as Markets Price 88% Chance of Fed Cut Amid U.S. Shutdown Jitters

GBP/USD Slides as Sterling Loses Post-Fed Momentum

The pound extended losses against the U.S. dollar with GBP/USD trading near 1.3430, down nearly 2.8% from last week’s peak at 1.3726. The reversal followed the Federal Reserve’s latest policy move, which triggered a short-lived rally before sellers reasserted control. Traders are also factoring in a looming 70% probability of a U.S. government shutdown, which has dented risk appetite and created added volatility for the pair. While the Dollar Index (DXY) eased to 97.95, Sterling failed to sustain upside traction, highlighting the fragility of the recent rebound.

Sterling’s Technical Landscape: Support and Resistance Levels

GBP/USD is holding just above the critical 1.3267–1.3280 support, which represents the 78.6% retracement of the August advance and aligns with the August low-week close. A break below this region would expose 1.3140–1.3144, an area overlapping with the 38.2% retracement of the yearly range, the May 2023 low, and the 52-week moving average. Should bearish pressure persist, the next key floor rests near 1.3056–1.3080, defined by the 100% extension of the June decline. On the topside, resistance is seen first at 1.3434–1.3469, while a more decisive barrier remains near 1.3648–1.3650. A sustained breakout above that range would revive bullish momentum toward 1.3749 and potentially the 1.40 handle.

Fed Dovishness vs. BoE Restraint Defines the Macro Picture

The divergence between U.S. and UK monetary policy is sharpening. The CME FedWatch tool signals 88% odds of another rate cut in October and a 65% probability of a further cut in December, despite inflation data showing headline PCE at 2.7% and core PCE steady at 2.9%. Meanwhile, the Bank of England is expected to keep its policy rate at 4.0%, with Deputy Governor Dave Ramsden stressing the need to maintain a restrictive stance until inflation returns to target. This divergence offers medium-term support for Sterling but keeps near-term momentum tilted toward the dollar, particularly with shutdown fears driving safe-haven flows.

Economic Data Risks Could Steer GBP/USD

Sterling’s path will be shaped by incoming U.S. releases. The Bureau of Labor Statistics has warned that if the shutdown occurs, major data releases—including Nonfarm Payrolls—may be delayed, leaving investors without critical guidance. For now, traders are focused on the Core PCE Price Index, which rose 0.3% MoM in August, as well as Fed commentary from officials including John Williams and Christopher Waller. Stronger data could pressure GBP/USD toward 1.3267, while a weak read may spark relief rallies back toward 1.3467 and higher.

Market Positioning and Momentum Indicators

Technical studies show mixed signals. The 50-day SMA at 1.3435 and the 200-day SMA at 1.3493 form a resistance cluster that has capped Sterling’s upside throughout September. The RSI sits near 59–60, suggesting room for more gains if resistance breaks, but highlighting that momentum remains fragile. Traders are cautious: rejection from resistance risks a slide back to 1.3397, while a clean move above 1.3467 could unleash buying interest toward 1.3535.

GBP/USD Trading Outlook: Balancing Downside Risks and Rebound Potential

At current levels around 1.3430, GBP/USD is delicately poised. If buyers defend 1.3267, the case for a short-term rebound toward 1.3535 remains intact. However, a decisive break below that floor would expose 1.3140 and 1.3056, confirming deeper bearish momentum. The divergence between the dovish Fed and the steady BoE keeps the medium-term outlook constructive for Sterling, but the short-term technical picture warns of further volatility. For now, the stance is Hold with a bearish bias, watching closely how price reacts to U.S. inflation and employment data as shutdown risk overshadows sentiment.

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