GBP/USD Price Forecast: Bears retain near-term control ahead of BoE rate decision

The GBP/USD pair attracts follow-through sellers for the second straight day on Thursday and retreats further from its highest level since September 2021, around the 1.3870 region, touched last week. The downward trajectory is sponsored by a firmer US Dollar (USD) and drags spot prices to the 1.3600 neighborhood or a nearly two-week low during the early European session as traders await the Bank of England (BoE) policy update.

The UK central bank is widely expected to leave the benchmark interest rates unchanged at 3.75% amid a rise in inflation, which remained above the BoE's 2% target in December. Traders, however, are still pricing in the possibility that the BoE will lower borrowing costs in 2026 amid signs of a weakening labor market. In fact, the UK Unemployment rate remained at a four-year high of 5.1% in the three months to November, and the number of employed people fell by 43,000 in December. Adding to this, slowing wage growth strengthens the case for further BoE easing. Hence, the focus will remain glued to the MPC vote split and the post-meeting press conference, where comments from BoE Governor Andrew Bailey will influence the British Pound (GBP) and provide some meaningful impetus to the GBP/USD pair.

Heading into the key central bank event risk, the GBP bulls opt to remain on the sidelines amid an extension of the recent USD recovery from a four-year low. US President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve (Fed) chair fueled speculations that the central bank will be less dovish than expected. Furthermore, heightened market volatility and Fed Governor Lisa Cook's hawkish comments, saying that risks are skewed toward higher inflation, lift the safe-haven Greenback to a nearly two-week high, which continues to exert some downward pressure on the GBP/USD pair. Any meaningful USD upside, however, seems elusive on the back of expectations of two more interest rate cuts by the US central bank in 2026. The bets were reaffirmed by Wednesday's dismal labor market report.

In fact, the Automatic Data Processing (ADP) Research Institute reported that private-sector employers added 22K new jobs in January compared to the previous month's downwardly revised reading of 37K and 48K consensus estimates. Adding to this, Trump said that he would have passed on Kevin Warsh's nomination if he had expressed a desire to hike rates and that there was not much doubt that the US central bank would lower interest rates. This, in turn, could cap the USD gains and act as a tailwind for the GBP/USD pair. Traders on Thursday will further take cues from the US economic docket – featuring JOLTS Job Openings and Weekly Initial Jobless Claims. Nevertheless, the mixed fundamental backdrop warrants some caution before placing aggressive bets and positioning for the next leg of a directional move.

GBP/USD 1-hour chart

Technical Analysis:

The GBP/USD pair finds some support near the 1.3600 mark, representing the 50% Fibonacci retracement level of the upswing from the January swing low, which should now act as a key pivotal point for traders. Meanwhile, the recent breakdown below the 100-hour Simple Moving Average (SMA) favors bears.

The Moving Average Convergence Divergence (MACD) remains below the zero line with the MACD line under the Signal line and a contracting histogram, suggesting weak bearish momentum. The Relative Strength Index (RSI) sits near 32 (oversold threshold), hinting that downside pressure is stretched.

Meanwhile, the 61.8% Fibo. retracement at 1.3548 underpins the downside, and a break would warn of a deeper deterioration. Absent such a breach, stabilization above mid-range support could allow an oversold bounce, though the declining 100-period SMA would keep recovery attempts fragile.

(The technical analysis of this story was written with the help of an AI tool.)