GBP/USD exhibited a notably positive trend this week, reaching multi-week highs in the 1.3430–1.3438 range before retreating to approximately 1.3360 by the end of the trading session. The recent movement was propelled by the latest 25 basis points Federal Reserve rate cut and indications of additional easing anticipated in 2026, impacting the USD and enabling the pound to surpass the 1.3400 level decisively. Despite a 70–80 pip retracement from the peak, the pair continues to maintain the majority of the gains accumulated over the past three weeks. The prevailing framework in GBP/USD is rooted in anticipations that the Fed will need to implement more substantial easing compared to the BoE through 2026. Following this week’s reduction, markets are set for further adjustments from the Fed, whereas the BoE is just beginning to consider its initial decrease. The relative path has benefited the pound and contributed to the rise above 1.3400. Concurrently, the decline in UK growth indicates that the UK component of the spread is weakening, which is precisely why the price has stagnated around 1.3430–1.3438 rather than progressing smoothly toward elevated levels.
October UK GDP registered a decline of -0.1% month-on-month, falling short of expectations of +0.1%, following a previous contraction of -0.1%. Two consecutive negative prints indicate a stagnating domestic economy. The disappointing data has elevated the market’s expectations for a December BoE rate cut to approximately 90% for a 25 basis point adjustment. A central bank easing into negative growth typically exerts downward pressure on GBP, which explains the pound’s immediate dip following the release. However, the overall uptrend in GBP/USD persisted due to the weakness of the dollar. In the latest weekly report, Jobless Claims in the U.S. increased by approximately 44,000, further supporting the narrative of a “cooling labor market.” The third consecutive 25 basis point reduction by the Fed, coupled with the soft data, has bolstered expectations for a more assertive easing trajectory in 2026. The outcome was a resurgence in dollar selling, leading to a significant movement in GBP/USD to approximately 1.3417 at one moment, elevating the pair above 1.3400 and reaching its peak in about six weeks before profit-taking occurred. The forthcoming direction in GBP/USD will be influenced by a robust schedule of data releases and policy announcements. The PMI releases, Average Earnings, and unemployment figures in the UK will significantly influence the Bank of England’s decisions regarding potential cuts beyond December. Weaker PMIs and subdued wage growth would heighten concerns about a recession and exert additional downward pressure on the pound. In the United States, Nonfarm Payrolls, the unemployment rate, CPI, Retail Sales, and PMIs will significantly influence the USD leg. A robust NFP or persistent inflation could bolster a wider recovery for the dollar; conversely, disappointing figures might reignite selling pressure on the greenback and somewhat mitigate the effects of a BoE rate cut on GBP. On the daily chart, GBP/USD continues to exhibit a clear upward trajectory. The price finds support at the intersection of the 100-day and 200-day moving averages, located near 1.3350. The most recent candle at the highs is a doji, indicating a pause and profit-taking as the market approached the 1.3430–1.3438 range. The observed pattern indicates a potential for short-term consolidation or a corrective pullback.
However, as long as the closes stay above 1.3350, the fundamental bullish structure remains intact rather than being reversed. The current RSI level around 60 indicates that GBP/USD is on an upward trajectory while remaining within a reasonable range. The market has not reached an overbought condition, indicating that the pair retains potential for upward movement, provided that forthcoming macroeconomic releases do not alter the current outlook. Increasing prices, solid backing at crucial moving averages, and moderate momentum collectively indicate a “buy on dips while the trend remains intact” scenario instead of a peak of exhaustion. On the upper side, resistance is clearly delineated. The psychological level of 1.3400 serves as the primary obstacle that has consistently limited intraday advances. Just above it lies the recent spike zone of approximately 1.3430–1.3438, indicating this week’s peak. A consistent daily close above that band would indicate that buyers have successfully absorbed the profit-taking flows, paving the way toward 1.3470. The 1.3470 area represents the next reasonable target for upward movement, provided that the BoE maintains a tone that is not overly dovish and that US data does not initiate a widespread USD short squeeze. On the downside, the primary support level to watch is the 1.3350 area, where the 100- and 200-day moving averages converge. Provided that GBP/USD stays above 1.3350 on a daily closing basis, the bulls maintain dominance in the market. A decisive break below 1.3350 reveals the next demand pocket near 1.3280, which has served as a recent accumulation zone. If 1.3280 fails, attention turns to the 1.3200 region, where the 20- and 50-day moving averages are relevant. A sustained drop below 1.3200 would effectively conclude the ongoing upswing and indicate a more significant corrective phase. Following the third consecutive 25 bps Fed cut, the USD experienced a significant sell-off but has begun to exhibit signs of stabilization as the week comes to a close. For GBP/USD, this indicates a balanced risk profile at the present levels.
A significant recovery in the dollar will strengthen resistance in the range of 1.3400–1.3438 and could push the pair back toward 1.3350 or potentially 1.3280. Conversely, should the upcoming US data lead to a decline in yields and reignite speculation regarding Fed cuts, the pound may leverage this opportunity to break through the 1.3438 level and target 1.3470. Recent positioning indicates that GBP/USD traders are navigating a landscape of extended gains while maintaining a bullish framework. Following three consecutive weekly advances and spot trading around 1.3400, new longs are becoming more cautious in light of the -0.1% / -0.1% back-to-back UK GDP prints and the nearly fully priced 25 bps BoE cut. Dip-buyers continue to engage above 1.3350; however, their activity becomes notably more discerning above 1.3430 as they await a clear catalyst. Simultaneously, short-term sellers are capitalizing on each advance toward 1.3400–1.3438 to counteract strength, wagering that sluggish UK growth combined with a stabilizing USD will limit additional gains. Examining the outlook beyond the upcoming week, the medium-term scenario for GBP/USD presents a conflict between comparative interest rates and comparative growth. The Fed’s trajectory suggests multiple reductions through 2026, whereas the BoE is just beginning to approach its initial cut, which theoretically bolsters GBP. However, the UK economy is currently exhibiting two successive months of -0.1% GDP, indicating a potential drift towards stagnation. If UK data persist in underperforming, the market is likely to adjust its expectations for a quicker easing cycle from the BoE, diminishing the yield advantage of the pound. This scenario could limit or even reverse the ongoing upward trend, regardless of any further cuts from the Fed in absolute terms.