- 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.
If you are interested in automated forex trading, check our detailed guide-
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.
–Are you interested to learn more about forex options trading? Check our detailed guide-
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.
Looking to trade forex now? Invest at eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
