GBP/USD Price Forecast - Pound Holds Above 1.35 After BoE Cut as Bulls Target 1.36 into Fed Minutes

GBP/USD: BoE ‘hawkish cut’ keeps cable above 1.35 while Fed drifts softer

GBP/USD short-term structure around 1.3510 and the 1.3550 cap

GBP/USD trades around 1.3510 after a two-day vertical move that pushed the pair through 1.3450 and locked it into a tight 1.3470–1.3518 band just under resistance. Price is holding clearly above the 1.3500 handle, signalling that buyers absorbed the initial spike after the Bank of England’s 25 bps cut to 3.75% rather than taking profits aggressively. The current behaviour is classic post-break consolidation: candles compress near the top of the recent range, volatility is suppressed by year-end liquidity, but the pair refuses to give back the breakout zone around 1.3450–1.3500, keeping the bias pointed higher as long as 1.3470 continues to attract dip-buyers.

BoE ‘hawkish cut’ and why it underpins GBP against USD

The core driver for GBP/USD is that the BoE is easing more reluctantly than the Fed. The December cut pulled Bank Rate down from 4.00% to 3.75%, but the messaging kept the door open only to a gradual, data-dependent path. With UK CPI still at 3.2% year-on-year after a recent 3.8% peak, the Monetary Policy Committee cannot justify an aggressive easing cycle, and money markets reflect that reality with just one full cut priced for the first half of 2026 and only about a fifty-fifty probability of a second by year-end. That profile is effectively a “hawkish cut”: nominal rates are drifting lower, but real yields are still high, and the forward curve refuses to price a rapid slide toward 3.0%. For GBP, that means the carry story stays alive and dips in GBP/USD toward the mid-1.34s are met with structural demand rather than forced liquidation.

UK inflation and growth mix: why 3.75% still supports GBP

The inflation and growth mix in the UK explains why GBP has a floor even after the cut. Headline inflation at 3.2% is above the 2% target, services inflation remains sticky, and wage growth has only cooled gradually. At the same time, activity data are soft enough to justify a mild easing path but not outright panic. That combination forces the BoE into a narrow corridor: it must ease to avoid over-tightening the real economy, but every 25 bps step becomes a close call. As long as Bank Rate trades in the 3.50%–3.75% zone with inflation above target, the real policy rate remains positive and attractive versus the US once the Fed’s cuts are fully priced. The market reads that as a reason to hold GBP on weakness rather than fade every rally, which is why GBP/USD is building a base above 1.3400 instead of slipping back into the low-1.30s.

Fed profile, DXY at 98 and the dollar side of GBP/USD

On the US side, the backdrop is structurally softer for USD than for GBP. The Fed has already cut by 25 bps, bringing the target range to roughly 3.50%–3.75%, with Core PCE trending towards the 2.8% area. Futures price an overwhelming probability that rates remain unchanged at the January meeting and only a modest chance of an additional 25 bps cut in the very near term, but the broader curve embeds a full easing path across 2026. That combination caps the dollar: the DXY index is stuck around 98.0, clinging to Fibonacci support near 97.98 and failing repeatedly to turn breaks above 98.25–98.60 into sustained impulsive rallies. For GBP/USD, this means the directional risk now depends less on an aggressive dollar squeeze and more on whether the Fed confirms that real rates will keep grinding down while the BoE stays slower and more cautious.

Daily technical picture: bullish structure above 1.3410 and 1.3335

On the daily chart, GBP/USD presents a clean bullish structure rather than a blow-off top. Price holds well above the rising 100-day EMA near 1.3335 and trades north of the 20-day moving average clustered around the low-1.34s, which means the medium-term uptrend is intact and pullbacks toward 1.3410–1.3450 are still technically healthy. The daily RSI sits just below the overbought threshold around 70, confirming strong momentum but also flagging that chasing late above 1.3550 without a retest carries short-term risk. The upper Bollinger Band near 1.3550 is the first serious daily barrier; the mid-band around 1.3410 is the first line of defence for bulls. A daily close back below 1.3410 would be the first sign that the trend is losing control and that a deeper test toward the lower band and prior demand area around 1.3270 is on the table.

Intraday channel, EMAs and the 1.3470–1.3535 battle zone

On the intraday 2-hour and 4-hour charts, GBP/USD is grinding higher within a rising channel, with the price respecting an upward-sloping trendline that started at the late-November lows. The 50-period EMA around 1.3455–1.3480 is acting as immediate dynamic support, while the 200-period EMA near 1.3400–1.3405 reinforces the broader bull trend. Horizontal supports are layered at 1.3470 and 1.3410, where recent dips attracted buyers; each touch has been followed by a rejection wick, signalling that real money demand still steps in on weakness. On the upside, resistance has been concentrated at 1.3535 as the first intraday barrier and 1.3550 as the band where the upper Bollinger line caps price. A clean break and close above 1.3535–1.3550 would confirm that the consolidation has resolved higher and open a measured move toward 1.3600 as the next logical target within the existing channel geometry.

Flows, positioning and how the market is treating the 1.3500 handle

Flow and positioning around GBP/USD reinforce the constructive read rather than a topping narrative. The surge through 1.3500 followed the BoE’s “hawkish cut” surprise and held, with price action showing shallow intraday pullbacks and no evidence of capitulation from late longs. Year-end liquidity is thin, suppressing follow-through and keeping ranges relatively narrow, but the key tell is that the pair refuses to sustain trades below 1.3470 despite multiple tests. That behaviour indicates that fast money is using dips toward 1.3470–1.3480 to re-enter the trend while real-money accounts are comfortable holding exposure into the first week of January, expecting that full market participation and the FOMC minutes will eventually inject enough volatility to resolve the range.

Trading stance on GBP/USD: bias bullish, effectively a Buy on strength and on disciplined dips

Putting the macro and technical layers together, the stance on GBP/USD is bullish, with the pair effectively a Buy, not a Sell, under current conditions. Policy divergence favours GBP because the BoE is slowing the easing cycle while inflation is still at 3.2%, whereas the Fed is further along the path toward lower real rates. Technically, the pair trades above all key moving averages, holds trend support, and is compressing just under the 1.3535–1.3550 cap rather than rejecting it. The constructive configuration holds as long as GBP/USD remains above the 1.3410–1.3450 support shelf and especially above the 100-day EMA near 1.3335; a daily close below those levels would downgrade the view to neutral and open the door to a fuller correction toward 1.3270. As it stands, a confirmed break through 1.3535–1.3550 argues for upside toward 1.3600 in the near term, with further medium-term extension possible if the BoE continues to lag the Fed on rate cuts and data do not force a more aggressive UK easing cycle.

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