GBP/USD Price Forecast - Pound Advances to 1.3240 as Dollar Slips on Fed-Cut Speculation

GBP/USD Price Action: Sterling Holds Firm as Dollar Weakens Ahead of Fed and BoE Decisions

GBP/USD continues to consolidate near 1.3235, showing resilience as the U.S. Dollar Index (DXY) slides toward 99.20, its weakest level since mid-November. Traders are pricing nearly an 89% probability of a 25-basis-point rate cut by the Federal Reserve (Fed) at the December 10 policy meeting, while the Bank of England (BoE) is expected to follow on December 18. This dual-dovish setup is keeping the pound steady against the dollar, as both central banks edge toward policy easing but with different economic pressures driving their decisions.

U.S. Dollar Weakness and the Impact on GBP/USD (GBP/USD)

The decline in the dollar is being fueled by softening U.S. data and dovish comments from Fed officials. The ADP Employment Change for November is forecast at just 5K new jobs, down from 42K, signaling an increasingly fragile labor market. The ISM Manufacturing PMI also contracted for a ninth consecutive month, falling to 48.2 versus expectations of 48.6. These figures reinforce the case for policy easing, while speculation over the next Fed Chair — reportedly Kevin Hassett, a noted advocate for lower interest rates — has accelerated selling pressure in the greenback. The 10-year Treasury yield has dropped to 4.06%, and the VIX remains subdued near 16.5, showing calm conditions favoring risk assets. As a result, GBP/USD continues to climb from its late-November base near 1.3150, with momentum building toward resistance around 1.3280–1.3325.

Bank of England’s Balancing Act Amid Cooling Inflation

While U.S. dollar softness supports GBP/USD, the BoE faces a very different domestic reality. UK inflation cooled sharply to 2.5% in November, moving closer to the 2.0% target, and GDP growth remains stagnant. The last Monetary Policy Committee vote split 5-to-4 in favor of holding rates at 5.00%, but four members supported a 25-bps cut, revealing a deeply divided outlook. The combination of falling consumer spending, flat retail volumes, and slowing wage growth increases pressure on the BoE to ease. Traders are now betting on a quarter-point rate cut on December 18, which could temper further pound gains if confirmed. Still, near-term fiscal stability from the government’s £22 billion budget headroom continues to offer modest support for sterling demand.

Market Positioning and Technical Levels

From a technical standpoint, GBP/USD is holding within a strong ascending channel, anchored by immediate support at 1.3210–1.3220 (aligned with the 50-day EMA) and deeper support near 1.3180 (200-day EMA). Resistance sits at 1.3275, followed by 1.3325, which coincides with mid-October highs. If momentum accelerates beyond 1.3330, the next bullish extension targets 1.3385–1.3400. The RSI at 59–60 suggests strengthening momentum without overbought signals, while the broader structure remains positive unless a daily close below 1.3180 occurs. On the downside, sustained weakness under 1.3150 could expose 1.3080–1.3100, a key retracement zone.

Macro Correlations and Cross-Asset Context

The pound’s resilience is amplified by broader market trends. Gold (XAU/USD) trading above $4,200, Bitcoin (BTC-USD) near $92,900, and declining yields collectively signal a pro-risk environment. Meanwhile, U.S. oil (WTI CL=F) remains range-bound near $59.20, limiting inflationary impulses that might otherwise delay Fed easing. The CBOE British Pound Volatility Index (BPVIX) has risen modestly from 7.5 to 8.2, reflecting pre-event hedging ahead of the twin central bank decisions. However, implied volatility still suggests the market is not fully pricing in a shock outcome from either the Fed or BoE, leaving room for a sharp directional breakout.

Trading Implications and Strategic Bias

Market participants are increasingly focused on who moves first — and faster — between the Fed and the BoE. If the Fed cuts rates on December 10, followed by a cautious BoE eight days later, the short-term reaction could push GBP/USD toward 1.3330–1.3400. Conversely, if the BoE signals a deeper easing cycle, sterling could retrace toward 1.3120–1.3150. Current market pricing implies implied volatility remains underpriced relative to the event risk. Option traders are gradually increasing exposure to GBP/USD straddles expiring after December 18, anticipating a potential 150–200-pip breakout in either direction.

Verdict: Directional Bias for GBP/USD

At current levels around 1.3235, GBP/USD (GBP/USD) carries a mildly bullish bias driven by sustained U.S. dollar weakness and market confidence in a controlled BoE easing path. The near-term technical floor sits at 1.3200–1.3180, while an upside break above 1.3325 could extend to 1.3380 and eventually 1.3440 if dovish Fed commentary continues to weigh on the greenback.
Final stance: GBP/USD — Buy on dips between 1.3180–1.3200; short-term target 1.3350–1.3400; stop below 1.3120.

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