GBP/USD Price Forecast: Recovers above 1.3350 as bearish bias persists below 100-day SMA

• Near 1.3380, GBP/USD advances in early European trading on Friday.
• Below the 100-day SMA, the pair retains a negative outlook as RSI momentum remains bearish.
• The 1.3390-1.3400 area offers immediate resistance, while 1.3300 marks the first target on the downside.

At around 1.3380, GBP/USD is trading higher in Friday’s early European session. As investors assess the UK Autumn Budget and await forthcoming Bank of England (BoE) decisions, the British Pound (GBP) is gaining against the US Dollar (USD).

A target for defence expenditure to reach 3% of Gross Domestic Product (GDP) has been outlined by the United Kingdom (UK). Finance Minister John Healey also announced billions in aid for Ukraine in a “clear message to Moscow.” On Wednesday, Healey identified 2030 as the target date for the 3% figure and reiterated the UK’s NATO commitment to reach 3.5% by 2035.

September’s US Personal Consumption Expenditures (PCE) Price Index rose 0.5%, matching market forecasts and following a 0.3% increase previously. The figures were published on Thursday by the Commerce Department’s Bureau of Economic Analysis.

By a 10-2 vote, the Federal Open Market Committee (FOMC) left its benchmark federal funds rate unchanged within a 3.75% to 4% range at Wednesday’s October policy meeting. Officials at the Federal Reserve (Fed) expressed hope that forthcoming data would guide their next decision.

According to the CME FedWatch tool, market pricing now puts the probability of a US interest rate rise in December at about 74.9%. Holding gold, which pays no yield, carries a greater opportunity cost when interest rates are higher.

Pound and gilts face neutral UK budget impact as modest fiscal drag leaves BoE outlook unchanged

Brown Brothers Harriman analysts describe the UK October 2026 Budget as “neutral for GBP and gilts,” observing that the government has “modestly increased fiscal tightening but plans to issue slightly more debt.” Their assessment highlights that the “cyclically adjusted primary balance, which excludes interest costs and adjusts for the economic cycle, is projected to improve from a deficit of -0.3% of GDP in 2026/27 to a surplus of +0.5% in 2027/28.” The resulting shift represents “a fiscal drag of 0.8% of GDP, up from 0.6% projected in March,” although BBH warns that “the additional fiscal restraint is probably too modest to materially curb the nearly 125bps of BoE rate hikes implied over the next twelve months.” Turning to funding, the analysts point out that “£250.6 billion of total gilt sales are planned for 2026/27,” a figure that is “roughly in line with expectations (around £249.6bn) and up £4.4bn from the £246.2bn planned in April.”

GBP rate-cut expectations remain constrained as Greene highlights stalled wage disinflation

At 7.4/10, Greene’s FXS Speechtracker reading is in line with the historical average, indicating an unchanged but decidedly hawkish position rather than a further hardening. Wage disinflation has stalled above rates compatible with 2% inflation, according to the emphasis of her remarks. Coupled with greater-than-expected economic resilience and a potential peak in labour market slack, this strengthens the case for caution over policy easing and provides modest support for GBP.

Resistance to near-term rate cuts is underscored by the call to “proactively lean against” second-round inflation effects and the acknowledgement that these risks exceed earlier assessments. With forward-looking indicators suggesting pay growth nearer 3.5%, the evidence supports the view that inflationary pressures remain persistent. This leaves the Bank of England leaning towards keeping rates higher for longer, limiting GBP’s downside.

Technical Analysis: GBP/USD remains under near-term bearish pressure

On the daily chart, the 100-day simple moving average (SMA) sits just above GBP/USD, restricting gains and leaving the short-term outlook cautiously bearish. Nevertheless, the pair trades above the 20-day Bollinger middle band, indicating underlying buying interest on dips. A Relative Strength Index (RSI) reading of 55.9 signals consistent, albeit moderate, bullish momentum, which has not yet absorbed the selling pressure immediately overhead.

The first upside barrier lies in the 1.3390-1.3400 area, where the 100-day SMA and the psychological threshold provide resistance. Clearing this area decisively could open the way towards the upper Bollinger band near 1.3435. A sustained move beyond that boundary would be required to relieve downward pressure.

Initial support comes from the 20-day Bollinger middle band at 1.3300, followed by the 27 October low of 1.3272. Further below, the lower Bollinger band near 1.3165 provides the next support area; a fall through it would leave the pair vulnerable to a more substantial correction.

(The technical analysis of this story was written with the help of an AI tool. Find out more.)