The GBP/USD pair is experiencing an upward trend for the third week in a row, currently trading around 1.3330, marking its highest point since October 27. The British pound’s recovery is occurring as investors are factoring in a 93% probability of a Federal Reserve rate cut at this week’s meeting, which has driven the U.S. dollar to a seven-week low. At the same time, the anticipation of a modest U.K. GDP growth of 0.1% in October has bolstered positive sentiment regarding the pound. The pair has now increased over 2.4% from November’s low of 1.3010, indicating a solid change in market dynamics as traders expect coordinated monetary easing from both central banks. The sentiment surrounding the U.S. dollar continues to exhibit fragility. Information from prediction markets indicates that traders are assigning almost guaranteed probabilities to a 25-basis-point Fed cut, with additional decreases anticipated over the course of 2026. The possible nomination of Kevin Hassett as the next Fed Chair in a Trump administration introduces an additional dimension of dovish expectations — Hassett has a history of advocating for substantial rate cuts to boost economic growth. As a result, the U.S. Dollar Index has slipped toward 102.1, down from its early-November high of 106.2, directly supporting the pound’s upside. Should the Fed validate a dovish shift and indicate a prolonged easing cycle, GBP/USD may continue to rise towards 1.3500, a threshold not reached since July.
Across the Atlantic, the Office for National Statistics is preparing to unveil U.K. GDP data, which is anticipated to reflect a 0.1% monthly growth in October following September’s -0.1% decline. On a yearly basis, the economy is projected to expand by 1.4%, an increase from 1.1%, indicating strength in the services sector despite ongoing inflationary challenges. The OBR has updated its 2025 GDP forecast to 1.5%, an increase from the previous 1%, suggesting that the slowdown may have reached its lowest point. The fiscal measures implemented by Chancellor Rachel Reeves, featuring a £26 billion tax adjustment, are perceived as growth-neutral and strategically beneficial for the credibility of the U.K., effectively mitigating household shocks while maintaining a stable level of public borrowing. The medium-term support for the pound is reinforced by these factors, as market expectations indicate that the Bank of England will uphold restrictive rates until the second quarter of 2026, despite a downward trend in inflation. The technical outlook for GBP/USD is clearly positive. The pair is currently positioned above the 50-day Exponential Moving Average and is nearing the 100-day Simple Moving Average around 1.3350, a level that has limited upward movement since late October. The Relative Strength Index is currently at 68, approaching overbought territory while indicating sustained upward momentum. A sustained close above 1.3350 would indicate a breakout from the 23.6% Fibonacci retracement zone (1.3400), paving the way for the next move toward 1.3500 resistance. The momentum oscillators and the MACD histogram indicate a strong positive trend, reinforcing the case for sustained buying activity, provided the pair remains above 1.3200 — the established short-term stop level. If bulls manage to maintain dominance above 1.3400, the medium-term trajectory points toward 1.3600, coinciding with the next significant retracement area that aligns with the 200-day EMA.
Data from CME Group indicates that open interest in British pound futures (6B contracts) has increased to 3 million lots, highlighting institutional inflows into sterling exposure. The average daily trading volume is approximately $100 billion notional, with GBP/USD futures recently quoted at 1.3312, reflecting a slight decline of 0.16%, yet still holding robust weekly gains. The CME CVOL™ Index for GBP/USD has risen to 6.05, suggesting that market participants are preparing for increased volatility ahead of the Fed and BoE decisions. Liquidity continues to be robust, and positioning data indicates that traders are net long on sterling for the first time since August, suggesting a strong belief that the cycle of U.S. dollar strength is nearing its peak. The U.S. Producer Price Index is currently in focus, with expectations of an increase to 2.7%, which may serve as a catalyst for volatility following the Federal Reserve’s actions. Any unexpected negative developments could exacerbate the dollar’s downturn and strengthen GBP/USD’s ascent beyond 1.34. On the other hand, an unforeseen increase in core inflation might momentarily restrict the appreciation of sterling. Nevertheless, the underlying trend continues to favor a bullish outlook, as the growth patterns diverge — the slowdown in the U.K. seems manageable, whereas the momentum in the U.S. is decelerating more rapidly than expected. The 10-year U.S. Treasury yield, currently around 3.86%, is on a downward trend, diminishing the appeal of the dollar in comparison to higher-yielding sterling assets.
Sentiment indicators suggest an increasing bullish inclination. Retail traders exhibit a sense of caution, while institutional flows are the primary drivers of price movements. Technical traders are currently concentrating on 1.3200 as a key near-term support level; provided the pair stays above this zone, trend-following models indicate a preference for continued appreciation. A decline beneath that threshold would negate the short-term bullish configuration; however, the probability-weighted scenarios presently lean towards a progression towards 1.3450–1.3500 by the end of the year.