Above 1.3350: GBP/USD Price Forecast Stays Bearish Below 100-Day SMA Despite Gains

• 1.3380 is within reach as GBP/USD advances in early European trading on Friday.
• Below the 100-day SMA, the pair retains a negative outlook as RSI momentum remains bearish.
• The 1.3390-1.3400 area offers immediate resistance, while 1.3300 marks the initial downside target.

1.3380 is the level around which GBP/USD is trading higher early in Friday’s European session. The British Pound (GBP) is gaining against the US Dollar (USD) as investors assess the UK Autumn Budget and await forthcoming Bank of England (BoE) decisions.

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

September’s US Personal Consumption Expenditures (PCE) Price Index rose 0.5%, matching market expectations and following a 0.3% increase previously. The Commerce Department’s Bureau of Economic Analysis published the figures on Thursday.

At Wednesday’s October policy meeting, a 10-2 vote by the Federal Open Market Committee (FOMC) left the benchmark federal funds rate unchanged in the 3.75% to 4% range. Officials at the Federal Reserve (Fed) said they hoped forthcoming data would guide their next decision.

According to the CME FedWatch tool, markets currently assign about a 74.9% probability to a US rate increase in December. As interest rates rise, so does the opportunity cost of holding gold, which pays no yield.

0.8% fiscal drag: UK Budget seen as neutral for Pound and gilts, leaving BoE path intact

The UK October 2026 Budget is “neutral for GBP and gilts,” in the assessment of Brown Brothers Harriman analysts. They observe that the government has “modestly increased fiscal tightening but plans to issue slightly more debt.” Their fiscal assessment highlights that the “cyclically adjusted primary balance, which excludes interest costs and adjusts for the economic cycle, is projected to improve from a deficit of -0.3% of GDP in 2026/27 to a surplus of +0.5% in 2027/28.” The resulting shift amounts to “a fiscal drag of 0.8% of GDP, up from 0.6% projected in March,” although BBH warns that “the additional fiscal restraint is probably too modest to materially curb the nearly 125bps of BoE rate hikes implied over the next twelve months.” Turning to funding, the analysts report that “£250.6 billion of total gilt sales are planned for 2026/27,” a total that is “roughly in line with expectations (around £249.6bn) and up £4.4bn from the £246.2bn planned in April.”

7.4/10 score: Greene’s wage warning restrains GBP rate-cut expectations

At 7.4/10, Greene’s FXS Speechtracker score is in line with the historical average. It indicates a consistently firm hawkish position, rather than a further shift towards tightening. Her emphasis on stalled wage disinflation above levels compatible with 2% inflation reinforces caution over policy easing and offers marginal support to GBP. Greater-than-expected economic resilience and a potential peak in labour market slack add to that caution.

Resistance to near-term rate cuts is underscored by the call to “proactively lean against” second-round inflation effects and the acknowledgement that these risks exceed previous assessments. Forward-looking indicators suggest pay growth nearer 3.5%, supporting the view that inflation pressures remain persistent. This keeps the Bank of England inclined to maintain higher rates for longer, limiting GBP’s downside.

Technical Analysis: 100-day SMA keeps GBP/USD’s near-term bias bearish

On the daily chart, the 100-day simple moving average (SMA) sits just above GBP/USD, restricting gains and preserving a cautiously bearish near-term bias. Holding above the 20-day Bollinger middle band nevertheless points to underlying buying interest on pullbacks. A Relative Strength Index (RSI) reading of 55.9 signals steady but modest bullish momentum, still insufficient to absorb the selling pressure immediately overhead.

The 1.3390-1.3400 area is the first resistance zone, combining the 100-day SMA with the psychological level. A convincing move through this zone could open the way towards the upper Bollinger band near 1.3435. A sustained break there would be required to relieve downside pressure.

Initial support lies at 1.3300, the 20-day Bollinger middle band, followed by the 27 October low at 1.3272. Below that, the lower Bollinger band near 1.3165 provides the next support level. A deeper decline would expose the pair to a more pronounced correction.

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