GBP/USD Price Steady at 1.2160 as Dollar Strengthens and BoE Rate Cut Bets Build

GBP/USD Holds Near 1.2160 as Fed’s Hawkish Tone Lifts Dollar and BoE Cut Bets Grow
The British pound (GBP/USD) was little changed around 1.2160 on Thursday, struggling to recover as renewed dollar strength and rising U.S. yields kept the pair under pressure. The move followed another sharp rebound in the greenback after several Federal Reserve officials reiterated their commitment to maintaining restrictive monetary policy until inflation convincingly returns to target. The 10-year U.S. Treasury yield held near 4.65%, keeping the dollar broadly supported across major currencies, while investors continued to scale back expectations for early Fed rate cuts.

The pound, meanwhile, has faced sustained selling interest as weak domestic data and dovish market expectations for the Bank of England (BoE) weigh on sentiment. Recent figures have underlined a soft patch in the U.K. economy, with September retail sales contracting by 0.4% and consumer inflation slowing to 2.9%, the lowest level since mid-2021. The moderation in price pressures has given traders confidence that the BoE’s tightening cycle has ended, with markets now pricing around 60 basis points of rate cuts by mid-2026, and growing speculation that the first move could come as early as the second quarter of next year. This divergence in rate outlook between London and Washington has widened yield spreads in favor of the dollar and kept the pound pinned near recent lows.

Market participants continue to watch U.S. data closely for signs that could shape the Fed’s next steps. The upcoming PCE inflation report, the Fed’s preferred gauge of price growth, will be pivotal in determining whether policymakers can afford to maintain their hawkish stance into early 2026. A stronger-than-expected reading could reignite speculation of an additional rate hike, reinforcing upward pressure on the dollar. Conversely, a softer outcome may offer temporary relief for GBP/USD, though the broader narrative remains one of U.S. resilience and U.K. fragility.

Technically, the pair remains confined within a narrow range, lacking clear directional conviction. Resistance is seen near 1.2235, aligning with the 50-day EMA, followed by 1.2280 and 1.2350. A break above these levels could shift near-term momentum toward the upside, though the broader bias remains negative while below 1.2300. On the downside, 1.2110 offers immediate support, followed by 1.2050, where buyers previously emerged during mid-September. Momentum indicators remain subdued, with the RSI hovering near 44 and MACD signals flattening below zero, confirming weak bullish participation and persistent selling pressure on rallies

In global markets, the dollar’s renewed strength was mirrored by a mild pullback in risk assets, while European equity futures turned lower as investors reassessed interest rate expectations. The U.K. bond market also reflected growing confidence that the BoE will pivot sooner than the Fed, as the 2-year gilt yield slipped below 4.3%, extending a three-day decline. Meanwhile, the U.S. 2-year yield held close to 4.97%, underlining the widening policy gap that continues to dictate short-term price action in GBP/USD.

With little major U.K. data due before next week, traders are focusing on U.S. macro releases and Federal Reserve commentary for directional cues. Any hawkish signal from the Fed could push GBP/USD back below 1.2100, while only a sustained break above 1.2250 would neutralize the bearish bias. For now, the pair remains vulnerable, and rallies are likely to be capped by sellers defending the 1.22–1.23 zone as long as the fundamental narrative favors the dollar’s outperformance

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