GBP/USD is currently positioned in the 1.3370–1.3420 range following a significant upward movement from the 1.3000 low observed on 4 November, primarily driven by a softer USD. The Fed executed a third consecutive 25 basis points reduction, adjusting the funds rate to a range of 3.50–3.75% with a 9–3 vote, which subsequently led to widespread selling of the Dollar. The dot plot indicates a single cut in 2026 followed by another in 2027; however, the markets are currently anticipating a more pronounced easing trajectory, leading to a diminishing impact of the guidance. The weaker US labor data, coupled with a decline in front-end yields, intensified the movement. Initial Jobless Claims at approximately 236K and the Federal Reserve’s strategy to purchase roughly $40 billion in short-dated Treasuries starting 12 December both supported the notion of more accommodative financial conditions. The Dollar Index has fallen to a seven-week low around 98.5, while GBP/USD has moved higher toward the 1.3380–1.3420 range after recovering from an intraday low of 1.3354, reaching highs between 1.3391 and 1.3417.
In the UK context, the narrative is not as straightforward, which is precisely why GBP/USD is hesitating below a clear breach of 1.3500. Current market expectations indicate approximately an 88% likelihood that the Bank of England will implement a 25 basis point cut next week, resulting in a Bank Rate of around 3.75%. Simultaneously, the UK CPI remains close to 4.0% year-on-year for November 2025, which is double the 2% target, and this situation continues to exert pressure on the BoE to avoid any complacency regarding inflation. Growth metrics remain stable: the fiscal watchdog has increased its 2025 GDP forecast from 1.0% to 1.5%, PMIs have risen to approximately 53.8, indicating expansion, and Friday’s monthly GDP is anticipated to show a +0.1% increase following a previous contraction. The interplay of these factors renders the communication from the BoE essential, and if the Bank implements just a single 25 bps cut while maintaining a cautious stance on future easing, many of the pre-positioned dovish expectations surrounding GBP will require adjustment.
Recent flow and commentary reveal a consistent trend across desks: the initial rise in GBP/USD was solely a result of Fed-induced Dollar weakness, whereas the pause above 1.34 is attributed to BoE risk. Following the FOMC decision, the pair surpassed 1.34, reaching new seven-week highs in the range of 1.3400–1.3420, before retreating as traders began to take profits ahead of the upcoming UK data cluster and the BoE decision. The FX coverage you mentioned indicates that Sterling is “holding onto Fed-related gains” around 1.3400, while it tends to slip toward 1.3365 whenever the Dollar makes an attempt at an intraday rebound. The outcome reflects a steady upward movement rather than a significant breakout: pullbacks are being purchased, yet there is evident hesitation to start new long positions at the peak of the range, especially with the policy risk in the UK remaining uncertain. From a technical perspective, GBP/USD is currently exhibiting a well-defined uptrend. The price experienced an upward movement from the low of 1.3000 on 4 November, reaching approximately 1.3380–1.3420, indicating an increase of around 3% over a period exceeding one month. The pair is currently positioned above the 50-day EMA, located beneath 1.33, and is maintaining its position above the short-term 20-period moving average on the four-hour chart close to 1.3350.
The price movement remains within a rising channel established in early December, with support identified at approximately 1.3351 and resistance near 1.3446. Subsequently, the 1.3330 level, represented by the 50-period moving average, along with the 1.3275 demand zone, constitutes the next significant supports. On the topside, the pertinent levels are 1.3391, followed by approximately 1.3420, then the channel top around 1.3445–1.3450, and the psychological barrier at 1.3500. Momentum indicators support the prevailing trend: the RSI on H4 is positioned in the low-60s, indicating a solid bullish stance without reaching overbought levels, while the ADX is close to 24, reflecting a strengthening trend that has not yet reached exhaustion. Provided that the range of 1.3275–1.3330 remains intact, the outlook suggests a potential upward continuation, targeting 1.35 as the main point of interest. Despite the central bank narratives, the macroeconomic landscape continues to favor an upward trajectory for GBP/USD, albeit with potential fluctuations along the way. On the US side, the Fed has already implemented three cuts since late 2024, currently positioned at 3.50–3.75%. The dot plot, however, has historically proven to be an unreliable indicator for future movements once data changes occur. Market sentiment indicates a belief that inflation will decrease from approximately 3.0% to near 2.4% by 2025, suggesting that the Federal Reserve may need to adopt a more accommodative stance than currently indicated, contributing to a defensive position for the Dollar during upward movements.
In the UK, with inflation at 4.0%, real yields continue to provide support for GBP against USD, particularly if growth and PMI figures remain stable. The Bank of England’s gradual approach combined with a hawkish stance, contrasted with the Federal Reserve’s ongoing easing, creates a structurally favorable environment for GBP/USD, despite potential short-term volatility driven by data releases. The options and signal providers integrated within your material indicate a setup characterized by significant volatility rather than a tranquil consolidation, with multiple assessments indicating a positive outlook with targets approaching 1.3500, utilizing ranges such as 1.3200–1.3250 as points of invalidation. Additionally, there is an emphasis on the potential for increased volatility in light of the upcoming UK labour, PMI, CPI, and BoE events next week, suggesting a “buy dips, not breakouts” approach for spot traders and volatility-based strategies for options traders. The information and pricing provided indicate a distinct inclination: GBP/USD has surpassed the 1.3000 level and is maintaining its position above significant moving averages and channel support as the Federal Reserve eases its stance and the Dollar faces downward pressure, while the BoE continues to contend with 4.0% inflation and is unlikely to execute a significant dovish pivot in a single meeting. Given the current circumstances, the most favorable trajectory continues to be upward, provided that the range of 1.3275–1.3330 is maintained, with the logical target on this leg being the psychological 1.3500 area, and a sustained break below 1.3275—particularly below 1.3200—would undermine the bullish structure and shift the narrative back in favor of USD as BoE communication or UK data evolve.