GBP/USD Forecast: Looks to build on Wednesday’s breakout through 1.3275-1.3280 confluence

The GBP/USD pair reverses a modest intraday dip and touches a fresh high since October 28, around the 1.3355-1.3360 region, during the first half of the European session on Thursday. The US Dollar (USD) struggles to register any meaningful recovery and languishes near an over one-month low, touched on Wednesday, and is seen as a key factor acting as a tailwind for the currency pair. Moreover, dovish US Federal Reserve (Fed) expectations favor the USD bears and suggest that the path of least resistance for spot prices remains to the upside.

The recent US macro data pointed to a gradual cooling of the economy, which, along with comments from several Fed officials, suggests that another interest rate cut in December is all but certain. According to the CME Group's FedWatch Tool, traders are currently pricing in a nearly 90% chance that the US central bank will lower borrowing costs by 25-basis-points (bps) next week. The bets were reaffirmed by the disappointing release of the ADP report on Wednesday, which pointed to signs of a softening US labor market. In fact, Automatic Data Processing reported that private payrolls fell by 32K in November, compared to the 47K increase (revised from 42K) in the previous month and below expectations of 5K job additions.

Adding to this, reports suggest that White House National Economic Council Director Kevin Hassett is seen as the frontrunner to become the next Fed Chair and is expected to enact US President Donald Trump's calls for lower rates. Moreover, a positive risk tone contributes to capping the safe-haven Greenback. The British Pound (GBP), on the other hand, draws support from the end of the UK budget uncertainty. In fact, Chancellor of the Exchequer Rachel Reeves announced a tax hike amounting to an annual £26 billion to fund the fiscal hole, and made a buffer for unforeseen circumstances. This offsets bets that the Bank of England (BoE) will cut interest rates this month and validates the positive outlook for the GBP/USD pair.

Data released last week showed that the headline UK Consumer Price Index (CPI) decelerated to the 3.6% YoY rate in October, following a steady reading of 3.8% for three consecutive months. This suggests inflation has peaked and keeps the door open for another BoE rate cut before the end of the year. Meanwhile, the Organisation for Economic Cooperation and Development (OECD) upgraded its UK growth forecast and predicted that the BoE will end its easing cycle in the second quarter of 2026. Traders now look forward to the UK Constructive PMI for some impetus ahead of US data – Challenger Job Cuts and Weekly Initial Jobless Claims – for some impetus ahead of the US Personal Consumption Expenditure (PCE) Price Index on Friday.

GBP/USD daily chart

Technical Outlook

The overnight breakout through the 1.3275-1.3280 confluence – comprising the 200-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement level of the September-November downfall – is seen as a key trigger for the GBP/USD bulls. With oscillators on the daily chart holding in positive territory, some follow-through buying beyond the 1.3365 area (50% retracement level) should allow spot prices to reclaim the 1.3400 mark. The momentum could extend further towards the 61.8% retracement level, around the 1.3455-1.3460 horizontal barrier, en route to the 1.3500 psychological mark.

On the flip side, corrective pullbacks might now find decent support near the 1.3300 round figure ahead of the 1.3280-1.3275 resistance breakpoint. Any further slide could be seen as a buying opportunity and remain limited near the 1.3225 zone. This is closely followed by the 1.3200 mark, which, if broken decisively, will negate the positive outlook and shift the near-term bias in favor of bearish traders. The GBP/USD pair might then accelerate the fall towards the 1.3145-1.3140 intermediate support before dropping to sub-1.3100 levels.

(This story was corrected on December 4 at 8:21 GMT to say in the headline and in the last paragraph of the technical outlook that Wednesday's breakout was through the 1.3275-1.3280 confluence zone, not the 1.3375-1.3380)