GBP/USD Weekly Forecast: Pound Sterling appears ‘sell-on-bounce’ trade as UK Budget looms
Premium|Take advantage of 50% OFF on your first month.
Start your subscription and get access to all our original articles.
You have reached your limit of 5 free articles for this month.
Get all exclusive analysis, access our analysis and get Gold and signals alerts
Elevate your trading Journey.
UPGRADE- Pound Sterling tested 1.3050 against the US Dollar on a fresh break to the downside.
- GBP/USD gears up for the UK Autumn Budget and high-impact US economic data releases.
- The pair remains vulnerable amid an impending Death Cross pattern and bearish RSI on the daily chart.
The Pound Sterling (GBP) broke its previous week’s consolidation to the downside against the US Dollar (USD), as GBP/USD revisited levels below the 1.3100 threshold.
Pound Sterling sellers returned with a bang
The broad-based USD resurgence and increased concerns over the United Kingdom’s (UK) fiscal health emerged as the two main underlying themes during the week, driving the GBP/USD price action.
The Greenback garnered strength from receding interest rate cut bets for the US Federal Reserve (Fed) and worries about AI technology stock overvaluations. However, the former was the main catalyst.
Markets preferred to hold the US currency in the lead-up to the quarterly earnings report from chipmaker giant Nvidia and the first US employment data release, following nearly two months without public data.
As a result, the upside in the pair remained restricted, with a fresh leg lower seen on the release of the UK Consumer Price Index (CPI) for October.
Data published by the Office for National Statistics (ONS) showed on Wednesday that the headline annual CPI increased by 3.6% in October, in line with market expectations and compared to a rise of 3.8% in September.
The UK inflation cooled down for the first time in five months, reviving bets for a rate cut by the Bank of England (BoE) next month. Following the UK CPI report, traders increased BoE easing bets with December cut probabilities rising to 85% versus 80% pre-data release.
The market now sees 63 basis points (bps) of monetary easing by the end of 2026 compared to 59 bps before the inflation report. GBP/USD hit fresh 11-day lows at 1.3038 in the aftermath.
Thereafter, Pound Sterling buyers briefly came up for air in the first half of Thursday’s trading, courtesy of the relief rally on global stocks. Nvidia reported a 65% jump in net income, beating analysts’ estimates and temporarily calming nerves surrounding overvaluation concerns.
However, strong US Nonfarm Payrolls data for September paused the risk rally, as markets believed that higher-than-expected job gains could dissuade the Fed from further monetary policy easing.
The NFP rose by 119,000 in September, following a 4,000 decrease (revised from +22,000) recorded in August. The reading outpaced the market forecast of 50,000. Meanwhile, the Unemployment Rate rose to 4.4% from 4.3% in this same period.
Markets continued to price in about a 40% chance that the Fed will lower rates next month as officials remained cautious about their policy stance due to inflation risks.
The renewed risk-aversion wave, combined with easing Fed rate cut bets, helped the USD hold its ground near ten-month highs against its major currency rivals, halting the pair’s recovery.
Buyers once again tried their luck on Friday but faced headwinds from a bigger-than-expected drop in British retail volume data. Retail Sales fell by 1.1% in October, against expectations of no growth.
Further, the UK S&P Global Preliminary data showed that UK private sector growth eased in November, adding to the downside pressure on the Pound Sterling. The S&P Global Composite Purchasing Managers' Index (PMI) dropped to 50.5 in November from 52.2 in October. The data came in way below the estimates of 51.8.
The USD held resilient against its peers on Friday and limited GBP/USD's upside as the S&P Global reported in its preliminary estimate that the Composite Purchasing Managers' Index (PMI) rose to 54.8 from 54.6 in October. This print highlighted an ongoing expansion in the private sector's economic activity at a robust pace.
UK Autumn Budget and US economic data set to rock GBP markets
The main event risk of the upcoming week is the British 2025 Autumn Forecast, followed by the Budget speech from Chancellor of the Exchequer Rachel Reeves.
The Budget is highly anticipated after the Financial Times (FT) reported earlier this month that UK Prime Minister Keir Starmer and Reeves scrapped plans to raise income tax rates in a massive U-turn.
According to the Guardian, speculation remains that “the chancellor could extend a freeze on income tax and NI thresholds beyond the planned 2028-29 deadline.”
Next in relevance will be the resumption of the mid- and top-tier economic data releases from the United States (US), the September Producer Price Index (PPI), Retail Sales and Durable Goods Orders data.
Meanwhile, the October Core Personal Consumption Expenditures (PCE) - Price Index figures are also slated for release, alongside the third-quarter Gross Domestic Product (GDP). But there is no official confirmation of these metrics as yet.
Additionally, speeches from the Fed and BoE officials will be closely scrutinized to gauge the path forward on interest rates from these major central banks.
GBP/USD Technical Outlook
On the daily chart, the 21-day Simple Moving Average (SMA) extends its decline beneath the 50- and 100-day SMAs, and the pair holds under all of them, keeping the short-term outlook bearish. The 50- and 100-day SMAs continue to slide, while the 200-day SMA edges higher, highlighting short-term weakness against a steadier long-term trend. The Relative Strength Index (RSI) stands at 36.55, below the midline and consistent with persistent selling pressure.
Adding credence to the bearish potential, the 50-day SMA is looking to cross the 200-day SMA from above, and if that happens on a daily candlestick closing basis it would confirm a Death Cross.
Immediate resistance aligns with the 21-day SMA at 1.3154. Recovery attempts could face the rising 200-day SMA at 1.3298, with additional caps at the 50-day SMA at 1.3320 and the 100-day SMA at 1.3392. RSI needs to firm toward 50 to suggest fading bearish momentum and allow a more durable bounce. While price trades beneath the descending short- and medium-term averages, the path of least resistance would remain to the downside.
(The technical analysis of this story was written with the help of an AI tool)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- Pound Sterling tested 1.3050 against the US Dollar on a fresh break to the downside.
- GBP/USD gears up for the UK Autumn Budget and high-impact US economic data releases.
- The pair remains vulnerable amid an impending Death Cross pattern and bearish RSI on the daily chart.
The Pound Sterling (GBP) broke its previous week’s consolidation to the downside against the US Dollar (USD), as GBP/USD revisited levels below the 1.3100 threshold.
Pound Sterling sellers returned with a bang
The broad-based USD resurgence and increased concerns over the United Kingdom’s (UK) fiscal health emerged as the two main underlying themes during the week, driving the GBP/USD price action.
The Greenback garnered strength from receding interest rate cut bets for the US Federal Reserve (Fed) and worries about AI technology stock overvaluations. However, the former was the main catalyst.
Markets preferred to hold the US currency in the lead-up to the quarterly earnings report from chipmaker giant Nvidia and the first US employment data release, following nearly two months without public data.
As a result, the upside in the pair remained restricted, with a fresh leg lower seen on the release of the UK Consumer Price Index (CPI) for October.
Data published by the Office for National Statistics (ONS) showed on Wednesday that the headline annual CPI increased by 3.6% in October, in line with market expectations and compared to a rise of 3.8% in September.
The UK inflation cooled down for the first time in five months, reviving bets for a rate cut by the Bank of England (BoE) next month. Following the UK CPI report, traders increased BoE easing bets with December cut probabilities rising to 85% versus 80% pre-data release.
The market now sees 63 basis points (bps) of monetary easing by the end of 2026 compared to 59 bps before the inflation report. GBP/USD hit fresh 11-day lows at 1.3038 in the aftermath.
Thereafter, Pound Sterling buyers briefly came up for air in the first half of Thursday’s trading, courtesy of the relief rally on global stocks. Nvidia reported a 65% jump in net income, beating analysts’ estimates and temporarily calming nerves surrounding overvaluation concerns.
However, strong US Nonfarm Payrolls data for September paused the risk rally, as markets believed that higher-than-expected job gains could dissuade the Fed from further monetary policy easing.
The NFP rose by 119,000 in September, following a 4,000 decrease (revised from +22,000) recorded in August. The reading outpaced the market forecast of 50,000. Meanwhile, the Unemployment Rate rose to 4.4% from 4.3% in this same period.
Markets continued to price in about a 40% chance that the Fed will lower rates next month as officials remained cautious about their policy stance due to inflation risks.
The renewed risk-aversion wave, combined with easing Fed rate cut bets, helped the USD hold its ground near ten-month highs against its major currency rivals, halting the pair’s recovery.
Buyers once again tried their luck on Friday but faced headwinds from a bigger-than-expected drop in British retail volume data. Retail Sales fell by 1.1% in October, against expectations of no growth.
Further, the UK S&P Global Preliminary data showed that UK private sector growth eased in November, adding to the downside pressure on the Pound Sterling. The S&P Global Composite Purchasing Managers' Index (PMI) dropped to 50.5 in November from 52.2 in October. The data came in way below the estimates of 51.8.
The USD held resilient against its peers on Friday and limited GBP/USD's upside as the S&P Global reported in its preliminary estimate that the Composite Purchasing Managers' Index (PMI) rose to 54.8 from 54.6 in October. This print highlighted an ongoing expansion in the private sector's economic activity at a robust pace.
UK Autumn Budget and US economic data set to rock GBP markets
The main event risk of the upcoming week is the British 2025 Autumn Forecast, followed by the Budget speech from Chancellor of the Exchequer Rachel Reeves.
The Budget is highly anticipated after the Financial Times (FT) reported earlier this month that UK Prime Minister Keir Starmer and Reeves scrapped plans to raise income tax rates in a massive U-turn.
According to the Guardian, speculation remains that “the chancellor could extend a freeze on income tax and NI thresholds beyond the planned 2028-29 deadline.”
Next in relevance will be the resumption of the mid- and top-tier economic data releases from the United States (US), the September Producer Price Index (PPI), Retail Sales and Durable Goods Orders data.
Meanwhile, the October Core Personal Consumption Expenditures (PCE) - Price Index figures are also slated for release, alongside the third-quarter Gross Domestic Product (GDP). But there is no official confirmation of these metrics as yet.
Additionally, speeches from the Fed and BoE officials will be closely scrutinized to gauge the path forward on interest rates from these major central banks.
GBP/USD Technical Outlook
On the daily chart, the 21-day Simple Moving Average (SMA) extends its decline beneath the 50- and 100-day SMAs, and the pair holds under all of them, keeping the short-term outlook bearish. The 50- and 100-day SMAs continue to slide, while the 200-day SMA edges higher, highlighting short-term weakness against a steadier long-term trend. The Relative Strength Index (RSI) stands at 36.55, below the midline and consistent with persistent selling pressure.
Adding credence to the bearish potential, the 50-day SMA is looking to cross the 200-day SMA from above, and if that happens on a daily candlestick closing basis it would confirm a Death Cross.
Immediate resistance aligns with the 21-day SMA at 1.3154. Recovery attempts could face the rising 200-day SMA at 1.3298, with additional caps at the 50-day SMA at 1.3320 and the 100-day SMA at 1.3392. RSI needs to firm toward 50 to suggest fading bearish momentum and allow a more durable bounce. While price trades beneath the descending short- and medium-term averages, the path of least resistance would remain to the downside.
(The technical analysis of this story was written with the help of an AI tool)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.