GBP/USD Price Forecast: Pound Holds 1.34 Floor While Bulls Target 1.36 Into 2026

GBP/USD Price Outlook: Bullish Channel Above 1.34 Into Year-End

GBP/USD Structure: Rising Channel Holds While Spot Trades Around 1.3490

GBP/USD is trading around 1.3490 after failing to extend beyond the 1.3530–1.3550 area, but the market is still clearly trading within a constructive uptrend. Price is oscillating around 1.3485–1.3490 after an Asian high near 1.3510 and a mild European fade, yet the pair remains inside a rising channel on the 2-hour chart and above every key trend-defining moving average. As long as spot holds the 1.34 handle, the dominant bias remains for higher levels rather than a deeper retracement.
On the daily chart, GBP/USD is comfortably above the 100-day EMA at 1.3336 and trades above the Bollinger middle band at 1.3393. That 1.3393–1.3336 zone is now the primary structural floor. Daily RSI sits near 66, having cooled from prior highs but still firmly in bullish territory. Price action is anchored in the upper half of the Bollinger envelope and edging toward the upper band around 1.3547, which is the first serious daily resistance cluster. A daily close through roughly 1.3550 would confirm continuation toward the upper channel region around 1.3600 and potentially 1.3650 if momentum extends.

GBP/USD Short-Term Price Action: Key Levels 1.3470, 1.3428, 1.3535, 1.3600

On intraday timeframes, GBP/USD is grinding higher inside a clean rising channel on the 2-hour chart. Immediate support sits around 1.3470–1.3450 where the 50-period EMA and short-term horizontal demand overlap. Just below, the next layer is 1.3428 and then the broader 1.3410–1.3393 band tied to the Bollinger middle line on the daily chart. As long as dips are contained above 1.3393, pullbacks into 1.3470–1.3450 and even 1.3428 should be treated as opportunities to build long exposure, not as evidence of a completed top.
On the topside, the market is respecting 1.3534–1.3535 as the first meaningful cap. That aligns with recent intraday highs and the top section of the Bollinger structure. Above that, 1.3561 and 1.3587 are the next resistance layers, followed by the psychological 1.3600 barrier and the upper channel boundary in the 1.3600–1.3620 region. A decisive break through 1.3600 on solid volume would likely unlock the 1.3650–1.3700 zone as stops above recent highs are triggered and momentum accounts chase the move.

GBP/USD Trend Context: From Breakout Off 1.3340 To Bullish Consolidation Below 1.3550

The recent pattern in GBP/USD is a textbook bullish consolidation. The pair staged an impulsive move from the 1.3340–1.3350 area up toward 1.3530, followed by sideways, shallow price action just under resistance. That structure is typical of a pause before a second leg higher, not a topping formation, provided pullbacks remain shallow and demand keeps reappearing above 1.3390.
The support level previously highlighted near 1.3348 has effectively become the origin of this leg. Since then, each corrective dip has formed a higher low, and the latest consolidation around 1.3470–1.3490 is occurring well above that base. That strong separation between current price and the original breakout zone confirms that bulls remain in control of the medium-term structure unless 1.3336 is broken decisively.

BoE Policy And GBP Support: First Cut To 3.75% But No Rush To Slash

On the GBP side, the Bank of England has started easing but is doing so cautiously. The Monetary Policy Committee cut Bank Rate by 25 bps in December to 3.75%, the first reduction since last August. The guidance was clear: policy will remain on a “gradual downward path,” and Governor Bailey stressed that each additional cut becomes a “closer call.”
This matters for GBP/USD because it frames the BoE as an institution normalizing slowly, not aggressively flooding the system with cheap money. With UK inflation still above target and wage dynamics not fully normalized, the BoE has room to reduce rates, but the pace will be measured. That keeps UK yields relatively supported compared with a scenario of rapid cuts and stops the pound from being treated as a pure funding currency.
History reinforces this point. During the 2008 easing cycle, once the first cuts arrived, GBP entered a clear, aggressive downtrend as policy slashed through multiple levels. The current environment is materially different: inflation dynamics, labour market structure and the BoE’s communication all suggest a shallower path. Markets understand that, which is why GBP/USD is trading near 1.35 instead of collapsing back toward 1.30.

Fed Path, DXY At 98.00, And The USD Side Of GBP/USD

On the USD leg, the Federal Reserve has already moved much further. It cut rates three times in 2025, totaling 75 bps, bringing the federal funds range to 3.50–3.75. Markets now look for at least two more cuts in 2026, with futures implying about an 18.3% probability of another move at the January meeting. The November core PCE print around 2.4%, the lowest in more than two years, gives the Fed justification to lean further toward easing without undermining credibility.
Despite that, the US Dollar Index (DXY) is holding around 98.00 in thin year-end liquidity. On a short-term chart, DXY is capped by the 50-period EMA near 98.12 and the 100-period EMA around 98.55–98.60. Price is stuck in a mild rising channel inside a broader downtrend structure, reflecting a currency that has lost its dominant bull trend but is not yet in a clean breakdown. That backdrop naturally favours crosses where the foreign central bank is easing more cautiously than the Fed, which is exactly the case for GBP/USD.
As the Fed’s easing cycle continues, rate differentials that once strongly favoured the USD are compressing. The compression is gradual but real, and it justifies GBP/USD holding above 1.34 despite periodic spikes in dollar demand driven by risk-off moves or data surprises. Every time renewed USD demand appears, the pair has so far found support well above 1.3390, confirming that the structural sellers of GBP are not in control of this tape.

Geopolitics, Safe-Haven Flows, And Volatility In GBP/USD

Safe-haven flows are the main counterweight to the bullish GBP/USD story. Uncertainty around Ukraine peace discussions, broader geopolitical tensions, and trade-war rhetoric all tend to generate episodic demand for the USD. These flows have produced intraday dips below 1.3500 and have pushed implied volatility in GBP/USD options to three-month highs.
However, the actual spot pattern tells you how resilient the pound is. Candles near support zones—particularly around 1.3470–1.3450 and 1.3428—show long lower wicks and smaller real bodies, signalling that sellers are failing to extend control. Each dip into those areas has been met by buying interest rather than follow-through selling. That behaviour is consistent with a market where geopolitically driven USD demand is being treated as a liquidity event to add longs in GBP/USD, not as a catalyst for a trend reversal.