GBP/USD-Price-Forecast - Pund Eyes 1.33 Breakout as Fed Cut Odds Rise and UK Budget Restores Confidence

GBP/USD Price Forecast - Pound Rises Toward 1.3300 as Fed Cut Bets and UK Fiscal Stability Drive Renewed Sterling Momentum

The GBP/USD pair continues to show firm momentum after rallying from last week’s low of 1.3100 to hover around 1.3239, testing short-term resistance near 1.3250. The pound’s performance has been buoyed by a mix of domestic fiscal reassurance, improving investor sentiment post-budget, and fading U.S. dollar strength ahead of the Federal Reserve’s December policy meeting. As of late London trading, GBP/USD trades near 1.3240, up 0.32% on the day, having posted five consecutive daily gains, its longest winning streak since September. The currency pair’s near-term trajectory now hinges on the interplay between the Bank of England’s cautious policy stance and growing conviction that the Fed will deliver another rate cut in two weeks.

Sterling Builds on Fiscal Optimism as UK Budget and Bond Stability Support Demand

The rally in the pound began immediately following the UK Chancellor’s budget presentation, which stabilized gilt markets and restored confidence in Britain’s fiscal outlook. The GBP/USD pair briefly hit a four-week high of 1.3260 before settling around 1.3220. The market interpreted the government’s balanced tone—avoiding both austerity and excessive spending—as a signal of fiscal prudence, which reduced pressure on the Bank of England to act aggressively.
UK bond yields remained steady, and foreign investors returned to gilts after months of capital outflows, reinforcing sterling’s strength. According to Standard Chartered, these conditions have positioned GBP/USD to potentially advance toward 1.34 in December, contingent upon a dovish pivot by the Federal Reserve.

Federal Reserve Dovish Turn Weakens USD and Fuels Pound Resilience

The U.S. dollar’s broad retreat has amplified GBP/USD’s upside. The DXY index, which tracks the dollar against major peers, slipped below 100.20, losing nearly 1.4% over the week as traders priced in a near 75–80% probability of a December rate cut. Fed officials, including New York Fed President John Williams, have publicly endorsed further easing, citing softer inflation and weakening labor data. The October CPI print at 2.8% and non-farm payrolls rising just 155,000 reinforced expectations for a dovish policy shift.

While the Fed’s rate cuts are intended to cushion slowing growth, they are simultaneously eroding dollar yields—pushing traders toward higher-yielding currencies like GBP. Historically, during similar easing cycles (2019 and 2023), the GBP/USD pair gained between 4–6% in the following month, suggesting potential continuation toward 1.3350–1.3400 in the near term if policy divergence widens further.

Bank of England Holds Line at 5.00% but December Cut Looms

The Bank of England remains cautious as inflation proves sticky, with October CPI at 4.1%, still double its 2% target. However, weak economic growth—Q3 GDP at just 0.1% and the OBR slashing 2026 growth forecasts to 0.8%—has intensified pressure for a rate reduction. Markets now price a 65% probability that the BoE will lower its policy rate to 3.75% at the December meeting.
Even so, policymakers including Governor Andrew Bailey maintain a hawkish undertone, signaling that cuts will be “gradual and conditional.” This cautious posture has paradoxically benefited sterling, as investors see the BoE as slower to pivot than the Fed. The divergence reinforces medium-term support for GBP/USD above 1.3180, while the 1.3300 resistance remains the immediate test before the December central bank meetings.

Technical Analysis: Sterling’s Bullish Structure Intact but Momentum Slows Near 1.3300

The GBP/USD daily chart shows a firm uptrend that began after the pair’s oversold October lows near 1.3000. Momentum indicators confirm strength: the RSI at 64 remains below overbought territory, and the MACD histogram continues to print positive bars above zero. Price action is holding firmly above both the 20-day EMA (1.3186) and the 50-day EMA (1.3124), underlining the strength of the current base.
Immediate resistance sits at 1.3250–1.3300, where prior support from mid-August flipped to resistance. A clean breakout above 1.3310 would expose the next target at 1.3385, while support rests at 1.3180, 1.3140, and 1.3115. The risk-reward ratio currently favors a tactical bullish stance, with dips likely to attract buying interest toward the 1.3150–1.3170 zone.

Macro Context: Dollar Weakness Reinforced by U.S. Economic Cooling

U.S. macro data continues to paint a picture of a decelerating economy. The ISM manufacturing index contracted for a ninth straight month at 47.1, while jobless claims climbed to 243,000, their highest since March. Retail sales growth also slowed to 0.2%, indicating waning consumer momentum. This environment supports the market consensus that the Fed will need to ease more aggressively in 2026.
As a result, U.S. 10-year Treasury yields dropped to 3.84%, their lowest since July, eroding the yield premium that previously supported the dollar. The correlation between yield differentials and GBP/USD has historically been strong (0.82 over the past year), suggesting further downside in the dollar could easily push the pair toward the mid-1.33s.

UK Economic Landscape: Growth Fragility Limits Long-Term Pound Potential

Despite near-term optimism, structural challenges continue to cap sterling’s longer-term upside. Productivity growth remains sluggish, and real wage gains are lagging inflation. The fiscal deficit for 2025–26 is projected at £104 billion, and business investment has yet to recover meaningfully from pre-Brexit levels.
The services sector, responsible for nearly 80% of UK GDP, shows signs of stagnation, while manufacturing PMI lingers below 50. These macro headwinds temper the bullish narrative, implying that GBP/USD rallies above 1.3400 may struggle to sustain without further improvement in domestic fundamentals.

Market Positioning: Sterling Speculative Longs Near 2023 Highs

CFTC data indicates that speculative net longs in the pound have risen to +38,000 contracts, the highest since August 2023. This bullish positioning reflects broad confidence in GBP, but it also raises the risk of profit-taking if momentum fades near 1.3300. The five-day rally has already slowed in pace, and intraday volume suggests that new buyers are showing caution ahead of the December central bank decisions.

Volatility and Options Market Dynamics Suggest Consolidation Phase

Implied volatility on one-week GBP/USD options has dropped to 7.8%, signaling expectations of range-bound trade between 1.3220–1.3270 into next week. Traders appear to favor short-dated call spreads targeting a limited rise to 1.3300, consistent with UOB Group’s forecast that sees the pound testing resistance before consolidation. Longer-dated traders, however, are hedging downside risks via put spreads near 1.3100, a level that aligns with the base of the current uptrend.

Global Cross-Currency Correlations: Sterling’s Relative Strength Against the Euro and Yen

While the pound’s performance against the dollar dominates headlines, GBP/EUR remains stable around 1.1680, and GBP/JPY continues to trade above 197.50, showing broad strength across the G10 spectrum. The divergence between a dovish Fed and a cautious BoE enhances GBP’s appeal relative to the euro and yen, which remain pressured by weaker monetary stances.

Outlook and Market Bias: GBP/USD Retains Bullish Bias Into December

Overall, GBP/USD remains supported by monetary policy divergence, fiscal credibility, and a weakening U.S. dollar backdrop. A sustained break above 1.3300 could trigger accelerated gains toward 1.3385–1.3400, while failure to hold 1.3180 would invite deeper retracement toward 1.3100. Given current positioning, macro divergence, and technical setup, the outlook remains constructively bullish into the December rate meetings.

Verdict: Bullish Bias – Buy on Dips
Support: 1.3180 / 1.3140 / 1.3100
Resistance: 1.3300 / 1.3385 / 1.3400
Outlook: GBP/USD likely to test 1.34 as Fed easing weakens USD and UK fiscal stability lifts confidence.

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