GBP/USD Price Forecast: Sticks to bullish near 1.3400 ahead of BoE decision on Wednesday

GBP/USD edges higher on Monday as hopes for Iran diplomacy undermine the safe-haven USD.
BoE rate hike bets further support the GBP and spot prices ahead of the key central bank event.
The constructive technical setup suggests that the path of least resistance remains to the upside.

Haresh Menghani FXStreet

The GBP/USD pair attracts some dip-buyers at the start of a new week and climbs back to the 1.3400 mark during the Asian session, stalling its modest pullback from the highest level since September 16 set on Friday.

The latest optimism over a potential diplomatic breakthrough to end the US-Iran war undermines the safe-haven US Dollar (USD). The British Pound (GBP), on the other hand, continues to draw support from expectations of tighter monetary policy from the Bank of England (BoE). This, in turn, acts as a tailwind for the GBP/USD pair, though bulls seem hesitant to place aggressive bets ahead of the key central bank event and important US macro data later this week.

The BoE will announce its policy decision on Wednesday and is widely expected to raise interest rates by 25 basis points (bps). Meanwhile, the US economic docket features the release of the ISM Manufacturing PMI, later today, followed by the ISM Services PMI on Wednesday and the crucial Nonfarm Payrolls (NFP) report on Friday. Apart from this, further developments surrounding the Middle East crisis could influence the USD and provide some impetus to the GBP/USD pair.

From a technical perspective, spot prices hold a mildly bullish bias above the 100-day Simple Moving Average (SMA) at 1.3387 while pressing a dense Fibonacci barrier just overhead. Moreover, momentum indicators stay supportive, with the Relative Strength Index (RSI) hovering near 57 and the Moving Average Convergence Divergence (MACD) indicator showing positive readings and a constructive tone above zero. This backs the case for additional gains for the GBP/USD pair.

Meanwhile, the 50.0% retracement at 1.3407 is the immediate cap, with higher resistances at the 61.8% level at 1.3471 and the 78.6% retracement at 1.3561 defining the next upside objectives if buyers can extend the move. On the downside, initial support is seen at the 100-day SMA at 1.3387, which guards the 38.2% Fibo. retracement at 1.3344 and a deeper pullback would expose the 23.6% level at 1.3265 before the structural Fibonacci anchor near 1.3138.

As long as GBP/USD holds above the 100-day SMA and these underlying retracement floors, it would retain a positive near-term tone, though a clear daily close above 1.3407 is needed to unlock a stronger advance toward 1.3471 and 1.3561.

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

GBP/USD daily chart

Economic Indicator

BoE Interest Rate Decision

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.

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