GBP/USD Price Forecast: Does steady trading above 1.3400 and key support keep the outlook constructive?

• Little changed near 1.3405, GBP/USD holds steady in early European trading on Tuesday.
• Bullish RSI momentum supports the pair’s positive outlook as it holds above the 100-day SMA.
• While 1.3465 marks the first resistance, immediate support lies at 1.3385.

A cautious trading mood leaves GBP/USD largely unchanged around 1.3405 in Tuesday’s early European session. With major events due later this week, traders are staying on the sidelines ahead of the US midterm elections, the Bank of England (BoE) interest rate decision and September’s US jobs data.

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

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

Could BoE guidance limit Pound gains as a tightening cycle begins?

Thursday’s Bank of England policy announcement and Monetary Policy Report will be the main 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.” In their assessment, “firmer UK inflation and economic activity back the move,” with the vote expected to be “7-2 with doves Alan Taylor and Swati Dhingra supporting a hold.”

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

Does stalled wage disinflation reinforce Greene’s hawkish BoE stance?

A score of 7.4/10 on FXS Speechtracker puts the BoE’s Greene exactly at the historical average, indicating an unchanged but decidedly hawkish position. Her emphasis on wage disinflation having stalled above levels compatible with 2% inflation adds to concerns that second-round inflation effects remain a significant risk. Forward-looking pay growth near 3.5% and an unexpectedly resilient economy reinforce those concerns.

A reluctance to back rapid policy easing is evident in Greene’s call for proactive action against these second-round effects and her assessment that the risks are now larger than previously believed. Her suggestion that labour market slack may have peaked also indicates that underlying wage pressures could endure. Such conditions typically favour the Pound as markets price in a more sustained tightening bias at the BoE.

Technical Analysis: Can GBP/USD sustain its positive outlook above the 100-day SMA?

A supportive near-term picture emerges on the daily chart, where GBP/USD remains above both the 100-day Simple Moving Average (SMA) and the Bollinger Bands’ 20-period middle SMA following its recent rebound from the lower band. At 57.9, the Relative Strength Index (14) remains positive without indicating overbought conditions. This suggests bullish momentum is still building as the pair nears the upper boundary of its recent volatility range.

The upper Bollinger band around 1.3465 provides the first upside hurdle, ahead of the 15 July high at 1.3558. Beyond that, attention turns to the 21 August high of 1.3675 as the next resistance.

Support begins at the 100-day SMA of 1.3385. Below this, the middle Bollinger band near 1.3320 comes into focus, followed by the 15 October low at 1.3184. Further selling beneath that level could bring the recent lower Bollinger band low around 1.3172 into view. 

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