GBP/USD Price Forecast - Pound Nears $1.3420 as BoE Decision and UK Data Tighten the Range

Fed Cut, Softer US Data And A Weaker USD

GBP/USD is trading around the 1.3370–1.3420 region after a clean rally from the 1.3000 low on 4 November, helped mainly by a weaker USD. The Fed delivered a third consecutive 25 bps cut, taking the funds rate to 3.50–3.75% with a 9–3 split, and that triggered broad Dollar selling. The dot plot points to just one cut in 2026 and another in 2027, but markets are already pricing a deeper easing path, so the guidance is being faded. Softer US labour data and a slide in front-end yields amplified the move. Initial Jobless Claims around 236K and the Fed’s plan to buy about $40 billion in short-dated Treasuries from 12 December both reinforced the idea of looser financial conditions. As a result, the Dollar Index dropped to a seven-week low near 98.5 and GBP/USD extended toward 1.3380–1.3420 after bouncing from the intraday low at 1.3354 and printing highs between 1.3391 and 1.3417.

BoE Policy Risk And UK Data Limit GBP Euphoria

On the UK side, the story is less one-directional, which is exactly why GBP/USD is stalling below a clean break of 1.3500. Markets now price roughly an 88% chance that the Bank of England cuts by 25 bps next week, which would bring Bank Rate to about 3.75%. At the same time, UK CPI is still near 4.0% year-on-year for November 2025, double the 2% target, and that keeps the BoE under pressure not to look complacent on inflation. Growth metrics are not collapsing either: the fiscal watchdog raised its 2025 GDP forecast from 1.0% to 1.5%, PMIs have pushed up to around 53.8, signalling expansion, and Friday’s monthly GDP is expected at +0.1% after a prior contraction. That combination makes the BoE’s communication critical. If the Bank delivers only a single 25 bps cut with a guarded tone on future easing, a lot of pre-positioned dovish expectations on GBP will need to be repriced.

Short-Term Flow Dynamics In GBP/USD

Recent flow and commentary show the same pattern across desks: the first leg higher in GBP/USD was pure Fed-driven Dollar weakness, while the hesitation above 1.34 is BoE risk. After the FOMC decision, the pair cleared 1.34 and hit new seven-week highs around 1.3400–1.3420, then eased back as traders started to fade strength ahead of the UK data cluster and the BoE decision. FX coverage you referenced describes Sterling “holding onto Fed-related gains” near 1.3400 while slipping toward 1.3365 whenever the Dollar attempts an intraday rebound. The result is a controlled grind higher rather than a breakout: dips are bought, but there is clear reluctance to initiate fresh longs at the top of the range while policy risk on the UK side is unresolved.

Technical Structure: GBP/USD Trend Up, 1.35 The Magnet

Technically, GBP/USD is in an established uptrend. Price rallied from the 1.3000 low on 4 November to roughly 1.3380–1.3420, a move of about 3% over a bit more than a month. The pair is trading above the 50-day EMA, which sits below 1.33, and is holding above the short-term 20-period moving average on the four-hour chart near 1.3350. The price action is contained inside a rising channel from early December, with support around 1.3351 and resistance close to 1.3446. Below that, 1.3330 (50-period MA) and the 1.3275 demand zone form the next key supports. On the topside, the relevant levels are 1.3391, then roughly 1.3420, then the channel top near 1.3445–1.3450 and the psychological barrier at 1.3500. Momentum indicators back the trend: the RSI on H4 is around the low-60s, firmly bullish but not yet stretched, and the ADX is near 24, showing a strengthening but not exhausted trend. As long as 1.3275–1.3330 holds, the structure favours continuation higher with 1.35 as the primary attraction.

Macro Balance Between GBP And USD Legs

Beyond central bank headlines, the macro balance still tilts in favour of GBP/USD upside, even if not in a straight line. On the US side, the Fed has already cut three times since late 2024 and sits at 3.50–3.75%, with a dot plot that historically has not been a reliable forward guide once data shifts. Markets are confident inflation will slow from around 3.0% to close to 2.4% in 2025 and that the Fed will have to ease more than it currently signals, which keeps the Dollar on the defensive on rallies. On the UK side, inflation at 4.0% means real yields are still supportive for GBP versus USD, especially if growth and PMI figures hold up. A BoE that moves slowly and retains a hawkish bias while the Fed steadily softens is structurally positive for GBP/USD, even if short-term swings around data can be violent.