Above 1.3400: GBP/USD Price Forecast Remains Constructive as Pair Holds Steady Above Key Support

• 1.3405 is the level around which GBP/USD holds steady in early European trading on Tuesday.
• Above the 100-day SMA, GBP/USD retains a positive bias, supported by bullish RSI momentum.
• 1.3465 marks the first resistance, while initial support stands at 1.3385.

GBP/USD is little changed near 1.3405. In Tuesday’s early European session, traders remain on the sidelines before major events later this week: the US midterm elections, the Bank of England (BoE) interest rate decision and US September employment figures.

At Thursday’s November policy meeting, the BoE is expected to lift the Bank Rate from 3.75% to 4.0%. The move would mark its first increase since August 2023, when inflation was still above the BoE’s 2% target. Following the anticipated Thursday increase, another hike in February is also likely, according to ING analysts. They cautioned, however, that market pricing for BoE rate rises “looks extreme.”

For further indications of the UK rate outlook, traders will scrutinise the press conference. Hawkish comments from BoE Governor Andrew Bailey could lend near-term support to the British Pound (GBP) against the US Dollar (USD).

25bps BoE hike expected; guidance could constrain Pound upside

Thursday’s Bank of England policy announcement and Monetary Policy Report will be the focus, according to strategists at Brown Brothers Harriman. They describe the BoE as “widely expected to start tightening with a 25bps hike to 4.00% after standing pat all year.” The strategists add that “firmer UK inflation and economic activity back the move,” and expect the vote split to be “7-2 with doves Alan Taylor and Swati Dhingra supporting a hold.”

Market rate expectations also face scrutiny. BBH says “BoE guidance and the updated MPR will test market expectations for 100bps of tightening over the next twelve months,” and cautions that “persistent spare capacity across the forecast horizon would strengthen the case for pricing out hikes and limit GBP upside.”

7.4/10 Greene score: stalled wage disinflation sustains BoE hawkish bias

A 7.4/10 score on FXS Speechtracker places BoE’s Greene exactly at the historic average, indicating an unchanged yet firmly hawkish position. Wage disinflation has stalled above levels compatible with 2% inflation. That emphasis, together with forward-looking pay growth close to 3.5% and an unexpectedly resilient economy, underlines concerns that second-round inflation effects still pose a material risk.

Rapid policy easing appears unlikely to win Greene’s support, given the call for proactive action against second-round effects and the assessment that these risks are greater than previously believed. The suggestion that labour market slack may already have peaked also implies that underlying wage pressures could endure. This backdrop typically favours the Pound as markets price in a more persistent tightening bias at the BoE.

Technical outlook: 100-day SMA underpins GBP/USD’s positive bias

Both the 100-day Simple Moving Average (SMA) and the Bollinger Bands’ 20-period middle SMA remain below GBP/USD on the daily chart. Following the recent rebound from the lower band, these indicators point to a supported near-term outlook. At 57.9, the Relative Strength Index (14) is positive but has yet to flag overbought conditions. This suggests bullish momentum continues to build as the price nears the top of its recent volatility range.

The upper Bollinger band, near 1.3465, provides the first resistance. Beyond it lie the 15 July high at 1.3558 and then the 21 August peak of 1.3675.

Support starts at 1.3385, where the 100-day SMA sits. The next levels are the middle Bollinger band around 1.3320 and the 15 October low at 1.3184. Sustained selling beneath that low could bring the recent lower Bollinger band low near 1.3172 into view. 

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