GBP/USD Weekly Forecast: Attention shifts to the BoE and hard data

Sterling keeps pushing higher

The Pound Sterling (GBP) notched up a third straight week of gains, finally breaking through the 1.3400 mark. It’s been a steady climb, and one that says more about the other side of the pair than anything happening at home.

Cable’s latest leg higher has come almost entirely on the back of renewed weakness in the Greenback, especially after the Federal Reserve (Fed) delivered an interest rate cut on Wednesday.

Looking ahead, the British Pound is likely to stay in the spotlight. A busy domestic calendar is lined up, with key UK data releases and the Bank of England (BoE) policy meeting on December 18 set to shape near-term direction.

In the rates space, UK money markets have been far less decisive. Benchmark 10-year gilt yields chopped around during the week and ended barely changed, offering little in the way of fresh signals for FX traders.

US Dollar weakness does the heavy lifting

Since bottoming out near the psychologically important 1.3000 area in November, Cable has closed lower in just one week. That period neatly coincides with the start of a more pronounced correction in the US Dollar (USD).

The USD sell-off reflects a growing belief among investors that the Fed is shifting onto a more dovish footing in the months ahead. Adding to the uncertainty is the looming end of Jerome Powell’s term as Chair in May, with speculation around his successor now firmly part of the market conversation.

December cut firmly back on the table

The ‘Old Lady’ kept interest rates unchanged at its early November meeting, but the message was unmistakably dovish. A surprisingly tight vote, along with hints that Governor Andrew Bailey could soon align with the more accommodative camp, kept the prospect of a December rate cut alive.

Despite UK headline inflation still sitting at uncomfortable levels, the nine-member Monetary Policy Committee (MPC) voted 5–4 to hold the bank rate at 4.0% for a second consecutive meeting. While the hold itself was widely anticipated, the narrow margin caught many off guard.

That split matters. It suggests the BoE is less confident than it might appear and increasingly comfortable with the idea that the next move is down, potentially as soon as December.

The dovish undertone was reinforced by a subtle tweak to the BoE’s forward guidance. Policymakers dropped the word “careful” and instead said that if disinflation continues, rates are likely to follow a gradual downward path. It may sound like a minor linguistic shift, but markets are unlikely to overlook it.

Further evidence came from the BoE’s Decision Maker Panel (DMP) survey. Firms now expect to raise prices by 3.7% over the next year, slightly higher than the previous reading, while inflation expectations held steady at 3.4%.

With headline CPI easing to 3.6% in October, a level the BoE believes marked the peak, the argument for cutting rates from 4.0% is gaining traction, even as wage growth expectations ticked up modestly to 3.8%.

Policymakers edging closer to easing

The BoE appears headed for another knife-edge 5–4 decision at its December meeting, but this time the balance may tilt towards a rate cut. The swing vote is once again expected to be Governor Andrew Bailey, who backed a hold in November.

Since that meeting, BoE commentary has largely followed established voting lines. The more hawkish voices, Clara Lombardelli, Catherine Mann, Megan Greene, and Huw Pill, continue to flag upside risks to inflation, persistent wage pressures, and uncertainty over how restrictive policy really is. Their stance suggests another vote to keep rates unchanged.

On the other side, the doves remain comfortable with the idea of gradual policy easing. Bailey has kept a low profile since November, but a softer set of labour market figures or CPI data (both due next week) could be enough to push him towards supporting a December cut.

Markets are already leaning that way. Current pricing implies close to a 90% probability of a quarter-point cut at the December 18 meeting, with around 60 basis points of easing expected by the end of 2026.

An interesting UK calendar looms

Beyond the BoE decision on December 18, traders will also be watching the UK labour market report on December 16 and the November inflation data release on December 17. Together, these releases should play a key role in shaping expectations for year-end.

What are techs saying?

GBP/USD is expected to meet its next up barrier at its December top at 1.3438 (December 11). The surpassing of that level would pave the way for Cable to confront the weekly peak at 1.3588 (July 24), ahead of its 2025 ceiling at 1.3788 (July 1).

On the flip side, there is interim support at the 55-day SMA at 1.3271, seconded by the December base at 1.3179 (December 2). South from here comes the weekly trough at 1.3037 (November 20) and the November valley at 1.3010 (November 5). A break below this level would shift focus to the April floor at 1.2707 (April 7).

Momentum indicators look bullish: The Relative Strength Index (RSI) near 59 keeps the door open to extra gains in the short-term horizon, while the Average Directional Index (ADX) around 26 is indicative of a robust trend.

Bottom line

The latest UK GDP figures confirm that the domestic economy is losing a bit of steam, broadly in line with the prevailing macro narrative. Combined with easing inflation and a gradually cooling labour market, this backdrop continues to support the case for lower BoE interest rates.

Against that setting, volatility in the British Pound could pick up. While the broader trend remains constructive, lingering uncertainty around the future path of Federal Reserve policy means any further push higher in the quid is likely to be uneven rather than straightforward.