GBP/USD Price Holds 1.3585 With Fed and BoE in Spotlight

GBP/USD Holds Near 1.3585 as Fed and BoE Decisions Loom

The GBP/USD pair is consolidating around 1.3585 after climbing to fresh two-month highs, supported by heavy dollar selling and speculation over a dovish Federal Reserve. Sterling has strung together three consecutive weekly gains, advancing from lows near 1.3150 in August to current levels, as traders shift focus to central bank policy meetings on both sides of the Atlantic.

Fed Rate Cut Bets Pressure the Dollar

Market pricing shows nearly a 100% probability of a 25-basis-point cut at the Fed’s September 16–17 meeting, which would lower the federal funds rate to 4.00–4.25%. With unemployment claims spiking close to four-year highs and sentiment indices collapsing, pressure is mounting on the Fed to signal more easing into year-end. Inflation at 2.9% in August complicates the message, but Powell’s remarks will be decisive. A dovish dot plot projecting rates closer to 3.00%–3.25% by end-2026 would confirm bearish momentum for the dollar, allowing GBP/USD to test the 1.3620–1.3650 resistance band.

Bank of England Steady as UK Budget Concerns Linger

The Bank of England meets on September 18, with markets widely expecting no policy change and the base rate to remain at 4.00%. UK inflation is running at 3.8%, almost double the target, limiting scope for cuts. However, political and fiscal pressures are intensifying, with Chancellor Rachel Reeves facing scrutiny over a widening deficit and speculation of higher taxes in the November budget. The last vote split at the BoE was 5–4 in favor of a cut, underscoring a fragile consensus. Any fresh dissent could weaken sterling even as dollar weakness provides support.

UK and U.S. Data Divergence Shapes Momentum

Sterling’s advance comes despite domestic softness, with July GDP growth stalling and industrial output underwhelming. In contrast, U.S. data has been mixed — softer labor and manufacturing numbers outweighing sticky inflation. This divergence has tilted positioning in favor of the pound, but limits its upside beyond 1.36 unless the Fed delivers a strongly dovish signal. Short-term momentum indicators show RSI above 60 and the 50-EMA crossing higher over the 200-EMA near 1.3487, signaling a potential golden cross if strength continues.

Technical Levels Define the Battle Zone

The breakout above 1.3575 confirmed bullish momentum, breaking a multi-week triangle pattern. Immediate support is at 1.3547 (50-EMA) and 1.3530, with further downside risk opening at 1.3370 if Fed communication surprises hawkishly. On the topside, resistance stands at 1.3621, followed by 1.3653, and then the broader four-year high near 1.3788. Price action is compressing along the upper Bollinger band, suggesting a potential volatility spike after central bank announcements.

Market Stance and Outlook for GBP/USD

Sterling’s path is tied to relative central bank credibility. If the Fed signals an extended easing cycle, GBP/USD could push through 1.36 and retest 1.3788 highs, confirming a bullish breakout. If Powell leans cautious while BoE members hint at fiscal or policy risks, the pair risks sliding back toward 1.3370. Given the balance of risks, GBP/USD remains tilted bullish in the near term but capped by UK fundamentals. The stance here is Buy on dips toward 1.3550 with targets at 1.3650, while recognizing that budget risks and BoE splits could re-inject volatility into sterling later in Q4.

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