GBP/USD is maintaining a range between 1.3370 and 1.3440 after testing 1.3446, with the spot fluctuating around 1.3373 to 1.3380. For 2025, the pair is approximately 6–6.5% elevated, transitioning from around 15-month lows to approaching a four-year peak, and is currently solidifying that progression. The current price action reflects typical late-cycle foreign exchange behavior, with the pair functioning as a relative-rates expression rather than a crisis indicator. The Bank of England reduced the Bank Rate by 25 basis points from 4.00% to 3.75% with a narrow 5–4 vote split, signaling a cautious and divided committee rather than aggressive easing. UK macro data supports a mildly dovish stance, with October GDP at -0.1% m/m and rolling three-month contraction, while core CPI eased to 3.4% but remains well above target, explaining why GBP/USD briefly dipped before stabilizing near 1.3373.
The most recent UK retail sales data underscores fragility in domestic demand. November volumes fell 0.1% m/m versus expectations for a 0.3% rise, following a revised 0.9% drop in October. On a year-over-year basis, sales rose only 0.6%, below forecasts, reflecting cautious consumers and subdued momentum. Despite this, GBP/USD remained stable near 1.3375 after peaking at 1.3446, while EUR/GBP hovered around 0.8756. Market reaction suggests that broader expectations for rate differentials and relative policy paths outweigh individual data releases in driving sterling positioning.
On the US side, the Federal Reserve has delivered its third 25 bp cut of the year, bringing the funds target range to 3.50–3.75%. Futures imply at least two additional cuts by late 2026, contributing to a decline in the US Dollar Index into the high-97 to low-98 range. This dollar softness acts as a key support for GBP/USD, alongside the still-restrictive UK policy stance in real terms. The narrowing GBP–USD rate gap helps keep the pair above 1.33, while weak UK growth limits upside, resulting in a managed range where rallies toward 1.3438 invite profit-taking and dips toward 1.3330–1.3360 attract demand rather than panic selling.
The medium-term technical structure remains constructive. Following late-November lows, GBP/USD rallied into the mid-1.34s before entering consolidation, with daily candles narrowing rather than signaling reversal. Support holds at 1.3330–1.3360, with deeper pivots at 1.3288, 1.3235, and 1.3180–1.3173 defining the broader uptrend floor. Resistance layers sit at 1.3438, 1.3470, and the 1.3500 handle, with 1.3527 as the breakout trigger toward 1.3600. Momentum indicators support this bias, while cross-asset signals—resilient UK equities, firm gold prices, and a softer dollar—indicate that GBP dips are being absorbed. Near-term direction hinges on UK labor and inflation data and US employment figures, with outcomes more likely to influence range boundaries than reverse the prevailing trend.