GBP/USD Price Forecast: Bullish potential intact as traders await Fed/BoE policy meetings

GBP/USD attracts some sellers as the US-Iran stalemate underpins the safe-haven USD.
The divergent Fed-BoE policy expectations could benefit the GBP and help limit losses.
Traders might also refrain from placing directional bets ahead of key central bank events.

Haresh Menghani FXStreet

The GBP/USD pair extends the previous day's retracement slide from the 1.3575 area, or over a one-week top, and attracts some follow-through selling on Tuesday. The downward trajectory drags spot prices to the 1.3500 psychological mark during the early European session and is sponsored by a goodish pickup in the US Dollar (USD) demand. The downside, however, seems limited as traders keenly await this week's key central bank events before positioning for the next leg of a directional move.

The US Federal Reserve (Fed) will announce its decision at the end of a two-day meeting on Wednesday, which will be followed by the Bank of England (BoE) policy update on Thursday. Investors will look for more cues about the future policy path amid worries that the war-driven surge in energy prices will rekindle inflationary pressures and negatively impact economic activity. This, in turn, would provide some meaningful impetus to the GBP/USD pair and determine the near-term trajectory.

In the meantime, the uncertainty surrounding US-Iran peace talks offsets expectations for a potential interest rate cut by the US central bank and assists the safe-haven US Dollar (USD) to regain some positive traction. Hopes for diplomatic efforts to end the Iran war receded after US President Donald Trump canceled his special envoy's planned visit to Pakistan. Furthermore, Trump reportedly was dissatisfied with Iran's new proposal, which would set ‌aside discussion of Iran's nuclear program.

This, along with a standoff over the Strait of Hormuz, keeps geopolitical risks in play and underpins the USD's reserve currency status, exerting some downward pressure on the GBP/USD pair. In fact, traffic through the strategic waterway remains blocked due to Iran's restrictions on movements and the US naval blockade of Iranian ports. However, bets for at least two rate hikes by the Bank of England (BoE) in 2026, with a 70% chance of tightening in June, could support the British Pound (GBP).

Hence, strong follow-through selling is needed to confirm that the GBP/USD pair's recent move up from sub-1.3200 levels, or the monthly swing low, has run out of steam and positioning for a further near-term depreciating move.

GBP/USD daily chart

Technical Analysis:

The GBP/USD pair is holding a constructive near-term bias as it sits above technically significant 100-day and 200-day Simple Moving Averages (SMAs). Furthermore, the Relative Strength Index (RSI) around 56 hints at positive but not overstretched momentum, while the Moving Average Convergence Divergence (MACD) stays marginally positive. The positioning and momentum indicators suggest that the upside pressure is intact, though recent gains may be moderating.

Spot prices now press the 50.0% Fibonacci retracement level of the January-March downfall, which is followed by the 100-day SMA at 1.3466, the 38.2% retracement near 1.3430, and the 200-day SMA close to 1.3415. A deeper pullback would expose the 23.6% retracement at 1.3328, ahead of the structural floor around 1.3163.

On the topside, a sustained break above the 50.0% retracement at 1.3513 would open the way toward the 61.8% Fibo. level near 1.3595, with further resistance seen at the 78.6% retracement around 1.3713 and the prior swing high zone at 1.3863.

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

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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