GBP/USD treads water ahead of key central bank decisions

The GBP/USD pair traded in a tight range around 1.3524 USD on Thursday, with movement constrained as markets await key US inflation data and pivotal policy meetings from both the Federal Reserve and the Bank of England next week.

The pound has managed to recover from a sell-off earlier in September, when concerns over UK fiscal sustainability pushed the currency to monthly lows and propelled long-term government bond yields to levels last seen in the late 1990s.

Sterling is supported by investor expectations that the Bank of England will refrain from aggressive rate cuts, especially as other major central banks, including the Fed, move towards easing. Another supportive factor is the UK’s elevated inflation, which remains the highest among G7 nations, with particularly persistent price growth in services and wages.

Recent data indicate the economy is proving resilient despite lingering inflationary pressures and a softening labour market. In this context, Chancellor Rachel Reeves faces mounting pressure to maintain fiscal stability without breaching the government’s borrowing rules. The upcoming budget statement in November will be closely watched.

Technical analysis: GBP/USD

H4 Chart:

On the H4 chart, GBP/USD is continuing a corrective decline from the recent high near 1.3584 USD. The pair may extend this move towards support around 1.3420 USD. Once the correction is complete, a rebound from this level could initiate a new upward move, with initial resistance at 1.3548 USD, followed by a retest of 1.3584 USD. The MACD indicator supports this view: although the histogram and signal line remain above zero, both are declining, suggesting near-term downward momentum within a broader consolidation.

H1 Chart:

On the H1 chart, the pair has tested 1.3517 USD and continues its corrective phase. The immediate downside target is support at 1.3485 USD. A break below this level could extend the correction towards deeper supports. The Stochastic oscillator reinforces this near-term bearish bias, with its signal line hovering near 20.0, indicating oversold conditions, while continuing to trend lower.

Conclusion

GBP/USD is trading cautiously as markets brace for next week’s central bank decisions. While the pound remains supported by relatively hawkish BoE expectations and high inflation, its near-term direction will likely be determined by the Fed’s tone and upcoming UK fiscal developments. Technically, the pair is undergoing a short-term correction, which may present buying opportunities if key support levels hold.