GBP/USD Price Forecast - Pound Holds 1.34 Ahead of BoE 3.75% Cut and Key US Jobs Data

GBP/USD: Sterling Holds the $1.33–$1.34 Zone as BoE Cut to 3.75% Meets a Soft US Dollar

UK macro pressure forces the Bank of England toward easier policy for GBP/USD
GBP/USD is trading around $1.3380–$1.3400, up roughly 0.25–0.30% on the day. The pair is holding firm even as markets price an almost fully discounted 25 bp cut from the BoE, which would take Bank Rate to 3.75%. The market also leans toward another cut around mid-2026. UK data justify that shift. October GDP printed at -0.1% month-on-month and the rolling three-month figure from August to October also contracted. That confirms a soft growth backdrop. Core CPI is running at about 3.4% year-on-year, the lowest since March but still close to twice the 2% target. That mix of weak growth and still-elevated inflation is classic late-cycle territory. It pushes the BoE to remove some restriction but prevents a panic easing cycle. Price action in GBP/USD reflects that nuance. Sterling is firmer, not collapsing, which tells you the coming cut is largely in the price. The risk is about guidance more than the decision itself.

BoE reaction function: how a 3.75% Bank Rate shapes the next leg in GBP/USD
The key risk for GBP/USD is not whether the BoE cuts. It is how far and how fast the central bank hints it might go in 2026. A 25 bp move with a narrow 5–4 vote split would signal a reluctant start to easing, not a rush. That would usually support the pound, because the curve would have to take out some of the most aggressive cut expectations. If Bailey signals “one and wait”, sterling can extend gains above $1.3438 and test the $1.3500–$1.3527 band. If he leans into weaker growth, stresses downside risks, and plays down inflation stickiness, the market will start to price a faster path below 3.50%. In that case GBP/USD will struggle to hold above the 200-day area. The next UK data cluster is decisive. Wage growth, unemployment and PMIs will either validate the easing bias or push the BoE back toward a slower path. The pair is sitting exactly where you expect it when traders do not want to commit before that confirmation.

US side of the equation: Fed at 3.50–3.75% and a softer USD cap the downside
On the US side, the Fed has already delivered its third 25 bp cut of the year. The target range is now 3.50%–3.75%. Markets price at least two more cuts by the end of 2026, with probabilities above 60% for further easing. That is more dovish than the median Fed projections. The US Dollar Index has slipped toward the high-97 to low-98 area, reflecting that repricing. Sentiment around the dollar is fragile. Traders are waiting for Nonfarm Payrolls, Average Hourly Earnings, and retail sales to decide whether the Fed will validate or push back against those expectations. A strong NFP print with solid wages will re-price the path closer to “fewer cuts”. That would give the dollar a floor and could knock GBP/USD back to $1.3330 or even $1.3280. A soft jobs and wages mix would do the opposite. It would deepen the dollar decline and allow sterling to squeeze higher through $1.3438. The pair is trading in the mid-$1.33s while the dollar drifts lower against most majors, which is consistent with this “data-dependent” limbo. mitrade.com

Cross-asset context: risk sentiment, FTSE 100, and gold near $4,300 support the pound’s tone
Risk sentiment is not in full risk-on mode, but it is far from panic. The FTSE 100 has recovered from recent dips and is pressing into resistance near 9,740–9,790. That tells you UK equities are still drawing capital despite domestic growth risk. At the same time, gold trades around $4,300 and is eyeing its prior record near $4,381. That is classic behaviour when markets expect lower real yields and a more dovish Fed. A weaker dollar plus firm commodities often translate into moderate support for high-beta currencies, including GBP. For GBP/USD, this backdrop means dips are being absorbed rather than chased lower. The pair has not reacted as if the UK is the outlier weak link. Instead, traders are viewing both central banks as moving toward easing, with the Fed arguably further along the path.

Short-term price action in GBP/USD: consolidation after a strong November–December rally
From a price-action perspective, GBP/USD has already completed a strong leg higher from late November lows into the mid-$1.34s. The pair tagged around $1.3438 at the recent high and has since moved sideways in a tight range. Candles are small. Ranges overlap. That behaviour is typical of consolidation, not a reversal. The pair is holding above the $1.3330–$1.3360 band, which aligns with short-term moving averages on the daily chart. Trend traders still see an ascending structure. Every dip toward $1.3360 has attracted buying, while spikes close to $1.3435–$1.3470 have met with profit-taking. That is a textbook “wait for the event” pattern when a BoE decision and US NFP are both due within days. The pair is coiled between well-defined support and resistance. A catalyst will decide which side breaks first.

Key technical levels for GBP/USD: $1.3330 floor, $1.3527 cap for now
The 200-day average sits close to $1.3340 and acts as the first structural floor. A cluster of levels between $1.3330 and $1.3360 marks the main support zone. Below that, $1.3288 is the first pivot from recent trend swings, while $1.3235 and $1.3180 are the deeper medium-term lines that define the broader uptrend. As long as GBP/USD trades above $1.3288, the medium-term structure remains bullish. On the topside, immediate resistance comes at last week’s high around $1.3438. Above that, the $1.3470 region is a minor hurdle, then the psychological $1.3500 handle. The October peak near $1.3527 is the key line that, if broken, opens room toward $1.3600. Momentum gauges such as RSI sit in the mid-50s. That confirms a positive bias but not an overbought condition. The market is not stretched. There is room for another impulsive leg higher if fundamentals line up.

Relative strength of GBP: outperformance versus NZD, modest gains versus USD and EUR
In the broader FX heat map, GBP is one of the stronger currencies on the day. It shows small gains versus the USD and EUR, and more notable strength against the New Zealand dollar. That pattern fits the macro story. The BoE is moving toward cuts but from a still-restrictive stance. UK inflation, at around 3.4% core, is higher than in many peers. That keeps real yields relatively attractive. At the same time, fiscal and political noise in the UK is lower than during the 2022 gilt crisis. The pound no longer trades as a quasi-emerging-market risk proxy. Instead, it behaves as a higher-beta G10 currency, benefiting when the dollar softens and selling off mainly when domestic data surprise to the downside. That context helps explain why GBP/USD holds around $1.3380 and does not trade like a currency in front of an aggressive easing cycle.

Event-driven risk path for GBP/USD: BoE, UK data and US jobs will set direction
For the next leg, the pair is hostage to three event clusters. First, the UK labour data. A clear rise in unemployment and a marked slowdown in wage growth will lock in a 25 bp BoE cut and keep the door open for more. That would usually weigh on GBP, but because the cut is already priced, the reaction may be limited to a pullback toward $1.3330–$1.3280 rather than a trend break. Second, the inflation print. If core and services inflation stay near 3.4% and show no renewed uptick, the BoE can argue that risk is now more balanced. That supports a controlled easing path. Any surprise re-acceleration would be a shock for sterling bears and could trigger stops above $1.3438. Third, the US Nonfarm Payrolls and wages data. Strong jobs and 0.4% or higher monthly wage gains would push the dollar back up and likely drag GBP/USD toward the lower end of the channel. Weak data would fuel talk of additional Fed cuts and give the pair the energy to test $1.3500 and above. Until those releases hit, range trading between $1.3330 support and $1.3470 resistance is the base case.

Strategy view on GBP/USD: bias is bullish, buy-on-dips makes more sense than chasing weakness
Given the current setup, the strategic bias on GBP/USD is bullish, with a preference to buy dips rather than sell strength. The pair trades above key daily averages. The recent high at $1.3438 has not triggered a sharp rejection. The BoE is moving more slowly than the Fed toward a full easing cycle. The dollar is under pressure as markets price a softer US policy path and as the Dollar Index drifts toward the high-97 area. As long as GBP/USD holds above $1.3280–$1.3330, the risk-reward favours upside toward $1.3500–$1.3600 into the first quarter of 2026. A daily close below $1.3235 would change that view and force a shift to neutral or short. Until that break happens, the pair is a Buy with a bullish bias, with the caveat that volatility will spike around the BoE decision and US data releases, and position sizing must respect that risk.

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