GBP/USD Price Forecast: Slips Below 1.3350 as Downside Bias Persists Below 100-Day SMA

• Near 1.3320, GBP/USD trades lower in early European dealings on Thursday.
• Below the 100-day SMA, the pair retains a bearish bias, although neutral RSI momentum leaves scope for further consolidation.
• At 1.3290 lies the first downside target, while 1.3385 provides immediate resistance.

Following the UK Budget, the British Pound (GBP) loses ground against the US Dollar (USD), leaving GBP/USD trading lower at around 1.3320 in Thursday’s early European session. Attention later on Thursday will turn to the US Personal Consumption Expenditures (PCE) inflation report for September.

A target date for defence spending to reach 3% of Gross Domestic Product (GDP) has been outlined by the United Kingdom (UK), alongside billions in aid for Ukraine announced by Finance Minister John Healey in a “clear message to Moscow.” On Wednesday, Healey earmarked 2030 for reaching the 3% threshold and reiterated the UK’s NATO commitment to achieve 3.5% by 2035.

At Wednesday’s October policy meeting, a 10-2 vote by the Federal Open Market Committee (FOMC) kept the benchmark federal funds rate within its existing range of 3.75% to 4%. Officials at the Federal Reserve (Fed) expressed hope that forthcoming data would help guide their next decision.

GBP and gilts await UK budget guidance on fiscal tightening and issuance

For Brown Brothers Harriman strategists, the key message is that "GBP and gilts will take their cue from today’s UK budget (12:30pm London, 8:30am New York)," as investors focus on "whether the government preserves the planned fiscal tightening and keeps gilt issuance in check." Citing the OBR’s March projections, they point to the "cyclically adjusted primary balance, which excludes interest costs and adjusts for the economic cycle, to improve from a 0.3% of GDP deficit in 2026/27 to a 0.3% surplus in 2027/28, implying a fiscal drag of 0.6% of GDP." Turning to supply, BBH draw attention to the forecast that "analysts expect 2026/27 total gilt sales of £249.6bn, up £3.4bn from April’s plan, but £2.5bn below March’s original figure."

The strategists see support for gilts, arguing that "maintaining or increasing the fiscal squeeze should support gilts by easing inflation pressure and tempering BOE hike expectations." Sterling faces a more balanced outlook, however, as they caution that "stronger fiscal credibility would compete with lower rate support and limit upside." In the alternative scenario, BBH warn that "fiscal slippage and heavier gilt issuance can drive gilt yields up and GBP down."

Dollar bulls retain support as Warsh reiterates firm 2% inflation commitment

A 7/10 reading on the FXS Speechtracker puts Warsh’s press conference firmly in hawkish territory, matching the established baseline and underlining his consistent stance against inflation. His insistence that “ensuring price stability is not about a fixed date on a calendar”, alongside the promise of “no ifs and or buts, we will deliver price stability”, points to a firm, data-dependent commitment to the 2% PCE target. That commitment is supported by “new monetary medicine” and the recent withdrawal of policy accommodation. By repeatedly citing inflation expectations “going the right way,” wider credit spreads and the growing effect of interest rates on technology and CAPEX, he conveys confidence that tighter policy is taking effect, without ruling out further restraint if required.

An increase of +14.39 points took the FXS Fed Sentiment Index to 141.89, well above the neutral threshold of 100 and clearly within hawkish territory. The reading is consistent with the unchanged FXS Speechtracker score of 7/10. Taken together, the elevated index and steady tone suggest markets should keep pricing in a forceful policy response to inflation. This provides a supportive setting for the Dollar against currencies whose central banks are regarded as less determined to secure price stability.

Technical Assessment: GBP/USD retains bearish bias below the 100-day SMA

With spot remaining beneath the 100-day simple moving average (SMA), the daily chart points to a modestly bearish short-term outlook for GBP/USD. Although the pair trades above the middle band of the 20-day Bollinger Bands, the nearby upper band and a neutral Relative Strength Index (RSI) reading close to 49 suggest consolidation beneath broader overhead supply, rather than the start of a fresh advance.

The Bollinger middle band, at around 1.3290, offers the nearest support. Below that, the 15 October low of 1.3184 comes into focus, ahead of the lower Bollinger band near 1.3165 as the next support area. 

The 100-day SMA at 1.3385 presents the first upside hurdle, followed by the upper Bollinger band around 1.3420, where sellers could return. Clearing that level decisively could open the way towards the 15 July high of 1.3558. 

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