GBP/USD Price Forecast: Declines to near 1.3250 as bearish bias persists below 100-day moving average
- GBP/USD softens to near 1.3250 in Thursday’s early European session.
- The negative outlook for the pair prevails below the 100-day SMA, with bearish RSI momentum.
- The initial support level is seen at 1.3202; the immediate resistance level to watch is 1.3311.
The GBP/USD pair trades in negative territory around 1.3250 during the early European trading hours on Thursday. The British Pound (GBP) edges lower against the US Dollar (USD) amid widening monetary policy divergence between the Bank of England (BoE) and the US Federal Reserve (Fed). The US weekly Initial Jobless Claims report and the Fedspeak will be in the spotlight later in the day.
BoE policymaker Alan Taylor said on Tuesday it was unclear that it would be practical for the central bank to do a single rate hike to tame inflation without fueling unwarranted market speculation of further increases.
Traders are pricing in nearly a 33 basis points (bps) of monetary tightening from the BoE by year-end and more than 100 bps by the end of 2027, according to LSEG-compiled data, although analysts broadly expect much more limited action.
Softer-than-expected US Personal Consumption Expenditures (PCE) inflation data weigh on the Greenback and act as a tailwind for the major pair. Financial markets now see an about 38.2% probability of a rate hike in October, down from about 45% before the US PCE data, according to the CME FedWatch Tool.
Pound outlook brightens as MUFG flags stronger UK growth and reverse-Brexit potential
Analysts at MUFG note that the UK growth backdrop has improved, with the bank having "raised their forecast for growth in Q3 to 0.4% up from their previous projection of 0.1% set back in July." They argue that "stronger growth will encourage the BoE to tighten policy soon if higher energy prices conte to prove more persistent," and highlight that one senior official at the central bank "judges that risks to the inflation outlook are ‘more titled to the upside’." Beyond the near-term policy implications, MUFG also points to the evolving political landscape, suggesting that greater openness to closer EU ties "opens up the possibility for a potential reverse-Brexit trade for the pound in the future."
Kashkari questions policy tightness as resilient economy keeps Fed hawkish
Fed’s Kashkari delivered a notably hawkish-leaning message, with a FXS Speechtracker score of 7.1/10, above the 6.2/10 historical average, underscoring concern that inflation near 3% remains “too high” despite recent data. The emphasis on a resilient economy, strong consumer spending, and broad job availability, alongside doubts about how tight policy really is and a potentially higher neutral rate, reinforces a bias toward further tightening, highlighted by penciling in one more hike this year and another in 2027 while still hoping to tame inflation with only modest action. Overall, the tone suggests the Fed is not yet convinced that current policy settings are sufficiently restrictive to guarantee a return to target.
The FXS Fed Sentiment Index slipped by 0.42 points to 143.28, signaling a modest pullback in perceived hawkishness even as the index remains firmly above the neutral 100 mark. This configuration indicates that, despite a slight softening versus recent readings, Fed communication as captured by the FXS Fed Sentiment Index and FXS Speechtracker still resides in clear hawkish territory, consistent with Kashkari’s openness to additional rate hikes and an elevated neutral rate.
Technical Analysis: GBP/USD remains bearish below the 100-day SMA in the near term
In the daily chart, GBP/USD maintains a bearish near-term bias as it holds below the 100-day simple moving average (SMA) and the Bollinger Bands 20-period middle band. The pair is edging closer to the lower Bollinger band, while the Relative Strength Index (RSI) at 33.20 hovers just above oversold territory, hinting that downside momentum remains in place but could be nearing exhaustion.
On the downside, immediate support level is located at the September 29 low of 1.3202, followed by Bollinger lower band near 1.3140. A daily close below this floor would expose the November 20, 2025 low of 1.3038 and then the 1.3000 psychological level.
On the topside, initial resistance stands at the September 30 high of 1.3311, en route to the Bollinger middle band at 1.3385, and the 100-day SMA at 1.3415. A more distant upside barrier is located at the upper Bollinger band around 1.3630.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
