GBP/USD Price Forecast - Pound Struggles at $1.3165 as UK Fiscal Shock and Rising USD

GBP/USD Price Forecast As Sterling Battles Fiscal Turmoil And U.S. Dollar Strength

GBP/USD opens the week hovering around $1.3165, carrying the full burden of the UK government’s fiscal reversal and the bond-market shock that followed the abrupt decision to scrap the income-tax hike. After signaling for weeks that taxes would rise, the U-turn deepened worries over a widening budget gap and immediately pushed UK yields sharply higher, unsettling sterling and shaking confidence in the credibility of the November 26 budget. The pair’s struggle to break above $1.3211 despite repeated attempts shows how tightly the fiscal narrative is anchoring GBP/USD and why buyers remain hesitant as the political backdrop deteriorates. Weak GDP at 0.1% added to the pressure, amplifying analyst commentary describing the mood around UK macro as “souring” with each disappointing print.

GBP/USD Locked In A Tight Technical Box As $1.3146 Becomes The Line Of Defense

The technical picture mirrors the political anxiety. GBP/USD has repeatedly tested $1.3146, the 38.2% Fibonacci retracement of the 2025 uptrend, holding that level for three consecutive weeks and proving that buyers still defend the zone even as confidence fades. The short-term trendline rising from early November keeps the pair above $1.3160, but the ceiling created by the 100-period moving average near $1.3175 and the 200-period near $1.3285 suppresses every rally. Sterling’s inability to print a sustained breakout above $1.3211 reflects active selling pressure, while RSI near 52 shows stabilization without conviction. If the pair loses $1.3133, the slide toward $1.3050 becomes highly likely, a level tested earlier when GBP/USD collapsed to $1.3000 with daily RSI falling to 23, the most oversold in more than two years.

BoE Cuts Loom As Markets Price An 80% Chance For December, Crushing Sterling’s Carry Advantage

The policy backdrop is turning heavier for sterling. Markets now price nearly an 80% probability of a December rate cut by the Bank of England, a dramatic adjustment driven by weak data and widening fiscal anxiety. ING projects the policy rate sliding toward 3.25% by mid-2026, matching current terminal pricing yet still forcing hedging costs and deposit rates down toward the middle of the G10 pack — a direct drag on GBP/USD. Analysts warn that the UK’s fiscal confusion and the fragile credibility of Prime Minister Starmer and Finance Minister Reeves create an environment where sterling faces prolonged structural softness even before the economic cycle fully turns.

DXY Strengthens Toward $99.40 As Fed Cut Expectations Shrink And Treasury Yields Hold Firm

Across the Atlantic, the U.S. Dollar Index works its way toward $99.40, gaining momentum after a sharp repricing of Federal Reserve expectations. The probability of a December rate cut plunged from 67% to 46%, driven by commentary from Kansas City Fed President Schmid insisting policy should continue “leaning against demand,” and St. Louis Fed President Musalem warning that easing too early risks destabilization. Treasury yields at 3.60% on the 2-year and 4.14% on the 10-year reinforce the dollar’s defensive bias. With Nonfarm Payrolls for September delayed to November 20, markets remain in data limbo after the U.S. government shutdown, leaving USD buyers in control until new figures reset expectations.

GBP/JPY And EUR/GBP Reveal Sterling’s Split Personality Across FX Markets

Sterling’s cross-performance paints a clearer picture of where real pressure lies. GBP/JPY has surged toward 204.00 after clearing 203.00, eyeing the yearly peak at 205.33 as traders continue punishing the yen. This strength confirms that GBP weakness is not broad — it is primarily directed against the dollar and euro. EUR/GBP, trading near two-month highs, reinforces this, with the euro benefitting from stronger regional fundamentals. The inverted hammer rejection at 0.8850 signals short-term exhaustion, but the broader bullish structure holds above 0.8750, a level once firm resistance now acting as higher-low support. If EUR/GBP closes firmly above 0.8800, pressure returns toward 0.8850, adding another layer of downward bias for GBP/USD.

Sterling Faces A Multi-Layered Squeeze As Politics, Data, Rates, And Risk Sentiment Merge Into Bearish Flow

When combining every factor — the tax-policy reversal, the GDP stagnation at 0.1%, rising bond yields, political doubts ahead of the budget, the 80% BoE cut probability, shrinking hedging premiums, the DXY climb toward $99.40, the heavy resistance at $1.3175 and $1.3211, and the structural disadvantage against EUR — GBP/USD forms a tightening bearish funnel. Every rally is sold. Every data point chips away at confidence. Every policy signal thickens the downward pressure. The pair is not collapsing, but it is being held underwater by a sustained combination of domestic fragility and a recalibrating U.S. rate environment.

Final Verdict: GBP/USD — SELL Bias While Below $1.3230

GBP/USD remains firmly under bearish pressure.
Upside remains capped beneath $1.3230.
If $1.3133 breaks, the path toward $1.3050 reopens.
Only a decisive reclaim of $1.3285 would challenge this structure.

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