GBP/USD Price Near 1.3540 as Fed Cut Bets Weaken Dollar, Pound Targets 1.3600

GBP/USD Rebounds Toward 1.3550 as Fed Cuts Loom and UK Sentiment Stabilizes

The pound-to-dollar pair GBP/USD is trading with a firmer tone, holding near 1.3540–1.3550 after Tuesday’s rejection from the 1.3590–1.3600 resistance band. The recovery follows mounting expectations that the Federal Reserve will deliver aggressive easing into year-end, with markets now pricing a 93% probability of a September 25bp cut and potentially a cumulative 75bp of cuts in 2025. The U.S. Bureau of Labor Statistics’ revision showing 911,000 fewer jobs created through March underlines the fragility of the labor market, feeding calls for more dovish Fed policy.

Technical Setup: Key Resistance at 1.3600, Support at 1.3500

From a technical perspective, GBP/USD is consolidating above the 100-day EMA at 1.3388, with momentum indicators supporting further upside. The RSI sits near 66.5, well above neutral, while Bollinger Bands show resistance at 1.3585–1.3600, a zone that capped the September 9 move. A confirmed break above this barrier could open targets at 1.3632 and further toward 1.3752, last seen on July 2. On the downside, initial support lies at 1.3496, with deeper levels at 1.3448–1.3388 if bears regain control. As long as price holds above 1.3510, the short-term structure remains bullish.

Fed Policy and Inflation Data to Dictate Next Move

The immediate catalyst for GBP/USD will be U.S. inflation data. The Producer Price Index (PPI) and Consumer Price Index (CPI) are scheduled this week, both capable of amplifying volatility. A softer PPI print below 0.3% month-on-month would reinforce Fed cut bets, likely pressuring the dollar and lifting cable toward 1.36 and beyond. Conversely, an upside inflation surprise could reinstate dollar demand, risking a break back under 1.3500. Traders are cautious, as these data points will shape not just the Fed’s September decision but also its longer-term rate trajectory.

UK Fundamentals Offer Limited Boost but Reduce Risks

Sterling’s advance is not driven by domestic strength but rather by the dollar’s vulnerability. Still, UK politics and bond markets have stabilized. The 30-year gilt yield remains capped below 5.50%, limiting downside pressure. Prime Minister Starmer’s cabinet reshuffle has been perceived positively, with markets welcoming reduced political risk ahead of the Autumn Statement on November 26. Analysts expect the Bank of England to maintain a hawkish hold through 2025, with hints that rate cuts may be delayed into 2026, contrasting with the Fed’s accelerating dovish tilt.

Market Positioning and Investor Sentiment

Investor flows reveal that positioning remains biased toward further pound strength. Scotiabank highlights the likelihood of GBP pushing toward the July multi-year high of 1.3789, while Bank of America cautions about structural vulnerabilities tied to UK fixed income volatility. BNP Paribas forecasts three consecutive 25bp Fed cuts at upcoming meetings, a scenario that would widen the policy divergence and support GBP/USD. The pair’s resilience above 1.35 confirms underlying demand, with options markets pricing elevated volatility around this week’s inflation data releases.

GBP/USD Verdict: Buy With Eyes on 1.3600 Breakout

With GBP/USD trading near 1.3540, the setup favors a bullish stance as long as the pair holds above the 1.3500 pivot. A breakout above 1.3600 would likely accelerate gains toward 1.3630 and 1.3750, levels that could reset medium-term targets near 1.40 by year-end if Fed cuts materialize. Risks lie in hotter-than-expected U.S. inflation, which could stall momentum and drag the pair back toward 1.3440. For now, the balance of data and technicals leans to a Buy, with traders advised to watch the 1.3510–1.3600 corridor as the immediate battleground.

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