• The GBP/USD forecast slightly edges lower despite the dollar weakness led by the dovish Fed tone.
• Lower US yields and broad greenback weakness continue to put a risk floor under GBP/USD.
• Pound stays vulnerable with growing expectations of a BoE rate cut next week.

The GBP/USD price is trading lower near 1.3365 on Thursday ahead of the London session, pressured by a modest rebound in the US dollar following Wednesday’s Federal Reserve meeting. Despite the pullback, the downside remains limited as the Fed ultimately delivered a dovish tone, encouraging investors to sell the greenback into any strength.

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The Fed cuts the rate by 25 bps for the third straight meeting. However, the voting split, with two members favoring a pause and Trump-appointed Stephen Miran requesting a more substantial move, reflects the growing division within the committee.

In Powell’s press conference, he emphasized that policymakers need time to assess the impact of the easing on the economy. Meanwhile, the Fed projected only one cut in 2026, but traders are speculating on two more cuts, especially after Powell flagged the downside risk to the labor market.  The shift in tone triggered a broad dollar sell-off, with the Dollar Index falling to the lowest level since October 21, while the GBP/USD marked a fresh top at 1.3391 before falling.

US yields also slid after the Fed announced fresh Treasury bill purchases, starting from December 12, initiating $40 billion program to stabilize liquidity. The earlier-than-expected balance sheet expansion plan weighed on the yields, adding more pressure on the dollar.

However, the GBP outlook remains complex amid the Bank of England’s easing expectations. Markets now price in an 88% probability of a BoE rate cut next week, following a series of softer UK data that signals easing inflationary pressure. The divergence, with the Fed being flexible and the BoE moving sooner than expected, is limiting the GBP/USD from extending its rally despite dollar weakness.

The broad market sentiment remains cautious as the GBP/USD is left to balance between the dovish Fed and the vulnerability in the pound linked to the BoE. Traders now await the US initial Jobless Claims data due in Thursday’s New York Session for intraday direction.

GBP/USD Technical Forecast: Correction Before Bullish Continuation

The GBP/USD 4-hour chart shows the price drifting slowly towards the 20-period MA at around 1.3350. The RSI is off the overbought zone but remains stable, indicating a temporary choppiness before an upside continuation.

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However, breaching the 20-period MA could push the price further down towards the 50-period MA at 1.3330, ahead of the demand zone around 1.3275. On the upside, today’s top at 1.3391 remains a key resistance ahead of 1.3420.

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David Woodsmith

STORY LINK Pound to Dollar Rate JUMPS as FED to Pause After Today’s Rate Cut

The Pound to Dollar exchange rate (GBP/USD) rallied to 1.33828 on Wednesday after the Fed cut rates by 25bps but signalled a higher bar for further easing, according to Wells Fargo. “The FOMC reduced the fed funds target range and signaled that additional easing will face a higher bar at its next meeting.”

Despite hawkish dissents, Wells Fargo notes the Fed still maintains an easing bias into 2025, with its policy-rate outlook unchanged. “The Committee maintains an easing bias, with the median 2025 rate unchanged at 3.375%.”

The bank expects the Fed to slow, not end, the easing cycle. “We continue to look for two more 25bps cuts next year.”

Wells Fargo adds that new reserve-management purchases are technical only. “RMPs will have no bearing on our view of the stance of monetary policy.”

PRE-FED:

GBP/USD found some support below 1.3300 and is trading around 1.3320 with a firm dollar limiting scope for any fresh advance.

The Federal Reserve policy decision is likely to be crucial for near-term direction with choppy trading and potential short-term dollar gains if the Fed is cautious over the scope for 2026 rate cuts.

Although noting the potential for dollar gains after the Fed decision, ING added; “but the release of what should be soft jobs data next week and seasonal December weakness suggest that today’s dollar rally might not last.

According to UoB; “today, there is scope for GBP to test 1.3265 before a recovery can be expected. Based on the current momentum, a clear break below this level is unlikely. On the upside, resistance levels are at 1.3330 and 1.3355.

IG Group commented; “The early September low at $1.33 is now being fought over, but a close above here helps to reinforce the bullish view.”

There are very strong expectations that the Fed will cut rates later on Wednesday by a further 25 basis points to 3.75% with the main focus on the policy outlook.

ING commented; “The big focus will be the Summary of Economic Projections (SEP), the number of dissenters against the 25bp cut, and then Chair Powell’s press conference.”

BNY Americas macro strategist John Velis commented; “The post-meeting press conference could be – as always – a wild card.”

There is the risk of relatively hawkish comments from Chair Powell and some dissents against the December decision to cut rates.

MUFG commented; “Given the divisions over the outlook it will be difficult for Powell to send a strong message of pause but no doubt by reaching a consensus the message will certainly be that the Fed have been pro-active and can now assess incoming data.”

Some members will also be reluctant to forecast further significant cuts for next year.

BNY’s Velis added; During recent FOMC pressers, Chair Powell’s tone has often departed from the actual policy action taken or the statement accompanying that action. We could easily see a rate cut, a dovish set of dots, and a somewhat hawkish qualitative assessment at Wednesday’s press conference.”

ING commented; “While all the above sounds dollar positive, it is also widely expected. And perhaps it is still a surprise that the rates market still has so much easing priced in. Presumably, this is the Kevin Hassett effect, where his arrival at the Fed in February can throw a dovish cloak over the FOMC outlook.”

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TAGS: Pound Dollar Forecasts

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Frank Davies

STORY LINK Pound to Dollar Price Forecast: GBP Steady with “Dots to Dictate Reaction”

The Pound to Dollar exchange rate (GBP/USD) traded steadily above $1.33 on Wednesday as markets positioned themselves ahead of the Federal Reserve’s final interest rate decision of the year.

At the time of writing, GBP/USD was trading near $1.3310, almost unchanged from the start of the session.

The US Dollar (USD) was muted through Wednesday’s European trade as investors assessed the likely outcome of the Federal Reserve’s evening policy announcement.

Expectations around a December rate cut have swung sharply in recent weeks, but market consensus has now solidified around a 25-basis-point reduction.

With the move largely priced in, attention has shifted to what may come next. Forward guidance from the Fed still holds the potential to move the Dollar, especially if Chair Jerome Powell strikes a firmer tone, as he did following October’s meeting.

According to Scotiabank, “After USD gains earlier this week and markets perhaps expecting a (mildly) “hawkish cut” today, traders are poorly positioned for messaging that leans somewhat dovish.

“After a 25bps cut today, swaps do not have another rate cut fully priced in until mid-2026.

“Beyond the rate decision, forecasts and the dots will dictate the market’s reaction.

“No changes are expected in the median dot for the next few years.

“The consensus does expect a mild nudge lower for the long-term median (i.e., terminal rate) dot to 3%, however, which would align a little closer to current market thinking.”

Traders will also parse the updated Summary of Economic Projections (SEP). Should policymakers maintain guidance for just one rate cut in 2026, compared with market expectations for at least two, the US Dollar could receive renewed support.

The Pound (GBP) treaded water on Wednesday, with the absence of UK economic data leaving Sterling without a clear catalyst.

Price action was largely guided by broader market sentiment, with traders hesitant to establish strong positions ahead of the Fed’s announcement.

This caution kept the Pound rangebound, contributing to the subdued tone across GBP/USD markets.

GBP/USD Forecast: Modest UK GDP Uptick to Provide Limited Support?

Beyond the Fed decision, focus will shift to the UK’s upcoming GDP release for October.

Economists expect the data to show the economy returning to growth for the first time since June, although only by around 0.1%. Such a muted rebound may provide limited support for Sterling and could instead reinforce concerns over the UK’s lacklustre economic trajectory.

Weak growth prospects would likely strengthen expectations of a Bank of England (BoE) interest rate cut next week, potentially limiting GBP upside.

On the US front, the Dollar may encounter headwinds on Thursday if initial jobless claims point to a larger-than-expected rise in early December, adding weight to the argument for a more accommodative Fed.

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David Woodsmith

STORY LINK Fed LIVE: Test for Pound Sterling Bulls, GBP/USD Dependent on Dip Buyers?

The Pound to Dollar (GBP/USD) exchange rate has found some support below 1.3300 and is trading around 1.3320 with a firm dollar limiting scope for any fresh advance.

The Federal Reserve policy decision is likely to be crucial for near-term direction with choppy trading and potential short-term dollar gains if the Fed is cautious over the scope for 2026 rate cuts.

Although noting the potential for dollar gains after the Fed decision, ING added; “but the release of what should be soft jobs data next week and seasonal December weakness suggest that today’s dollar rally might not last.

According to UoB; “today, there is scope for GBP to test 1.3265 before a recovery can be expected. Based on the current momentum, a clear break below this level is unlikely. On the upside, resistance levels are at 1.3330 and 1.3355.

IG Group commented; “The early September low at $1.33 is now being fought over, but a close above here helps to reinforce the bullish view.”

There are very strong expectations that the Fed will cut rates later on Wednesday by a further 25 basis points to 3.75% with the main focus on the policy outlook.

ING commented; “The big focus will be the Summary of Economic Projections (SEP), the number of dissenters against the 25bp cut, and then Chair Powell’s press conference.”

BNY Americas macro strategist John Velis commented; “The post-meeting press conference could be – as always – a wild card.”

There is the risk of relatively hawkish comments from Chair Powell and some dissents against the December decision to cut rates.

MUFG commented; “Given the divisions over the outlook it will be difficult for Powell to send a strong message of pause but no doubt by reaching a consensus the message will certainly be that the Fed have been pro-active and can now assess incoming data.”

Some members will also be reluctant to forecast further significant cuts for next year.

BNY’s Velis added; During recent FOMC pressers, Chair Powell’s tone has often departed from the actual policy action taken or the statement accompanying that action. We could easily see a rate cut, a dovish set of dots, and a somewhat hawkish qualitative assessment at Wednesday’s press conference.”

ING commented; “While all the above sounds dollar positive, it is also widely expected. And perhaps it is still a surprise that the rates market still has so much easing priced in. Presumably, this is the Kevin Hassett effect, where his arrival at the Fed in February can throw a dovish cloak over the FOMC outlook.”

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts