GBP/USD Price Forecast - Pound Drops to 1.31743 as Fiscal Turmoil and Delayed US Data Shake Markets

GBP/USD Momentum Under Political Shock, Fed Uncertainty And Sterling Vulnerability
GBP/USD opened the week locked inside a fragile structure near 1.31743 after a sequence of political shocks, delayed U.S. data releases and diverging expectations for December’s Federal Reserve decision. The pair failed to escape its lower-realm congestion despite briefly challenging 1.32000, with traders forced to price in the consequences of the U.K.’s fiscal turbulence while the U.S. Dollar waits for clarity from multiple late economic releases. The currency pair remains pressure-sensitive because of the sudden gilt selloff that drove the 10-year yield from 4.44% to 4.55%, a violent shift that immediately triggered liquidation across GBP positions and sent GBP/USD sliding before stabilizing into the weekend near 1.31743. The political narrative around Chancellor Reeves’ budget ambiguity continues to dictate Sterling’s direction more aggressively than macro data, fracturing investor confidence at the exact moment U.S. markets prepare for a heavy slate of delayed NFP, CPI and sentiment prints.

GBP/USD Volatility Fueled By U.K. Fiscal Uncertainty
Sterling’s selloff began with speculation that Reeves abandoned an income-tax hike in the late-November budget, igniting fears that fiscal tightening would fail to materialize and that the deficit would spiral unfixed. Markets reacted instantly: GBP/EUR collapsed to 1.1280, a 30-month low and the exact level analysts at ING flagged as critical support before warning that a break below could extend losses toward 1.1140. GBP/USD mirrored the move, retracing earlier gains and re-anchoring near 1.31743. The rapid gilt repricing—yields spiking 11 bps in hours—underlined the scale of market discomfort and reflected a liquidation dynamic similar to stress episodes seen in 2022. Even after partial intraday stabilization, Sterling traded jittery as media reports hinted at alternative tax measures such as extended threshold freezes, possible cuts and shifting revenue strategies. Every iteration of uncertainty pushed GBP/USD into renewed choppiness, overriding technical expectations and leaving traders without a stable directional anchor.

GBP/USD Pressured As U.S. Dollar Reclaims Support From Delayed Macro Data
The U.S. Dollar re-established footing as investors priced in the consequences of the 43-day government shutdown, which blocked essential data and forced the Fed to operate without complete visibility ahead of its December meeting. This created a speculative environment rather than one driven by confirmed economic signals. The return of government offices next week means delayed NFP will hit markets on Thursday, accompanied by inflation readings and sentiment data that could sharply alter Fed expectations. GBP/USD—which was trading above 1.34000 before the shutdown—failed to regain that territory because markets no longer assume aggressive rate-cut momentum from the Fed. The last cut came paired with explicit warnings about missing data and uncertainty, cooling prior optimism and supporting USD dips. Risk appetite deteriorated further as global equities softened and PMIs signaled muted activity. This broader risk aversion compressed GBP/USD into a more defensive range and delayed any attempt to retest pre-October levels.

GBP/USD Technical Structure Shows Compressed Ascending Attempts And Rigid Resistance
While GBP/USD managed to climb into slightly higher short-term terrain late in the week, technical pressure zones remain firm. Resistance at 1.32000 continues to cap upside attempts, and price action repeatedly stalls before establishing sustained momentum. The lower realm visible across the one-month, three-month and six-month charts reflects a persistent bearish undertone that has not reversed despite intermittent rallies. Support remains shallow: 1.31290 acts as near-term footing, but a break below exposes a slide toward 1.30700 and potentially 1.29800 if U.K. political instability deepens. If bulls reclaim 1.31900 and sustain above that threshold without sharp reversals, upward continuation toward 1.33100 becomes more realistic. But given that GBP/USD approached 1.34000 before the shutdown and now trades nearly 230 pips lower, the recovery path remains contested by sentiment and macro uncertainty rather than pure chart mechanics. Traders must also consider that equity-linked sentiment is fragile, and intraday reversals remain highly probable during high-volatility sessions.

GBP/USD Reacts To Labor Data Risks, Inflation Releases And U.S. Fed Minutes
This week’s data-heavy environment injects significant directional risk into GBP/USD. The U.K. CPI print drops Wednesday, a major test after stagnating growth and weak GDP readings last week. Markets will immediately compare U.K. inflation with the U.S. data pile arriving shortly after. Thursday’s delayed NFP release, accompanied by broader labor statistics, holds the most market-moving power for GBP/USD, particularly because U.S. policymakers were forced to operate blind for weeks. Friday’s University of Michigan sentiment read gains critical importance after a dramatic 30% year-over-year drop, the second-lowest since 1978, signaling severe household caution. Financial institutions remain nervous: ADP job cuts averaging 11,000 per week and rising unemployment fears mean GBP/USD is trading in an environment where both currencies are reacting to incomplete information, magnifying volatility. Continued political instability in the U.K. magnifies the effect, giving the U.S. Dollar cleaner defensive flows even when U.S. indicators show softening trends.

GBP/USD Sentiment Dominated By Market Anxiety And Shifts In Global Risk Appetite
Sterling’s internal weakness—fiscal uncertainty, jittery bond markets, soft GDP and political dislocations—makes it overly sensitive to external risk conditions. When global markets turn risk-off, USD receives immediate inflows because the Dollar Index still trades above the major Fibonacci support at 98.98 and remains structurally favorable. Investors are reluctant to commit to GBP when upcoming U.K. political decisions remain unpredictable and market reactions to every budget rumor continue to demonstrate the fragility of confidence. GBP/USD tends to spike on small improvements but cannot hold upward pressure because the fundamental backdrop remains unresolved. Financial institutions continue to model cautious positioning, limiting Sterling’s ability to sustain rallies beyond 1.31900 without decisive macro catalysts.

GBP/USD Outlook: Direction Hinges On Fiscal Clarity And U.S. Data Shock Potential
With price trading near 1.31743 and repeatedly failing to reclaim the higher territories above 1.32000, GBP/USD enters the week with compressed upside and disproportionately large downside exposure. The speculative range between 1.31290 and 1.33100 remains valid, but the balance of signals gives the advantage to sellers unless U.K. fiscal clarity stabilizes gilt markets and reduces volatility. Until traders see firm direction from both the Fed minutes and U.K. CPI, GBP/USD remains shaped by anxiety rather than conviction. The data-heavy U.S. calendar holds the power to swing the pair by hundreds of pips, particularly if NFP deviates sharply from expectations after weeks of missing reports. Political volatility in the U.K. continues to overshadow fundamentals, and any renewed bond-market stress will instantly push GBP/USD to test lower support levels. Based on the current combination of fiscal instability, USD defensive strength and unresolved macro trends, the pair leans bearish, with downside risks holding more weight than bullish catalysts in the immediate term.

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