- The GBP/USD weekly forecast remains tilted to the upside amid a weaker dollar.
- Softer US macro data and aggressive Fed easing could keep the pound bulls alive.
- BoE’s imminent rate cut could cap the upside.
The GBP/USD price closed last week on a firm footing, marking a weekly gain of more than 1% and closing near 1.3235. The move stemmed from a weaker dollar and improving fiscal sentiment in the UK. The Fed’s aggressive repricing, which slashed US yields and reduced the greenback’s interest rate advantage, weighed on the dollar.
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What Happened Last Week
The dominant driver behind the GBP/USD rally was the greenback’s sell-off. Fed funds futures now price in 87% probability of a 25 bps rate cut in December, a dramatic shift from last week’s 40%. Softer US releases and dovish commentary triggered a sharp decline in Treasury yields, fueling expectations that the Fed is nearing the beginning of an easing cycle.
In the UK, the pound sterling drew additional support from Chancellor Rachel Reeves’ Autumn Budget. Markets responded positively to the larger-than-expected £22 billion fiscal buffer, despite a heavier tax burden and downgraded growth projections. The budget calmed the gilt markets, stabilizing the pound in the near term.
However, the underlying UK outlook remains feeble. The OBR flagged weaker medium-term growth and rising inflation pressures. This boosted the GBP sentiment temporarily, while broader sluggish productivity and fiscal concerns remain headwinds.
The Bank of England also plays a significant role, as traders now price a 70% probability of a rate cut in December. Governor Andrew Bailey noted that disinflation remains on track, while cooling wage growth and weak retail sales also support an easing sooner.
GBP/USD Key Events Next Week
The GBP/USD price will take cues from:
- US economic data: ISM surveys, JOLTS, and ADP Employment will be crucial to watch. Softer labor data could weaken the dollar and lift GBP/USD.
- UK inflation and activity: Markets will closely watch disinflation trends and the BoE’s guidance.
- Risk sentiment: Deteriorating global macro trends could favor safe-haven appeal.
Overall, the bias remains cautiously bullish, with a weaker dollar supporting the upside but the BoE’s imminent easing cycle. The major events ahead include:
United Kingdom:
- Services PMI (Final)
- Construction PMI
- Financial Stability Report
- MPC members speeches
United States:
- ISM Manufacturing PMI
- ISM Services PMI
- ADP Employment Change
- Weekly Jobless Claims
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GBP/USD Weekly Technical Forecast: Bearish Crossover Capping Upside
The GBP/USD daily chart indicates a slowdown in bullish momentum, with the pair retesting the broken local high. The bearish crossover of 100- and 200-day MAs poses a threat to the upside. Meanwhile, the RSI remains flat above 50.0, suggesting a potential consolidation.
However, the order block near 1.3080 keeps the downside limited while the buyers could emerge again and aim to test the 50-day MA near 1.3300.
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