GBP/USD Price Forecast: Monthly High Near 1.3410 Holds Firm

GBP/USD holds a firm tone around 1.3410, close to its monthly high.
The British Pound has gained support from expectations of a hawkish BoE stance.
UK Retail Sales and flash PMI releases from the UK and US are next on investors’ radar.

A firm British Pound (GBP) keeps GBP/USD close to its monthly high around 1.3410 during Thursday’s European session, reflecting gains against the US Dollar (USD). Underpinning the pair is September’s hot Consumer Price Index (CPI) reading from the United Kingdom (UK), which has reinforced expectations of a hawkish Bank of England (BoE).

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Does the UK inflation surprise strengthen the case for BoE tightening?

Renewed upward inflation pressure is evident in the latest UK release, according to analysts at Nomura. They point out that “both headline and services inflation” in September were “above consensus expectations.” Underlying price pressures also remain persistent on the BoE’s core gauge, the analysts say, emphasising that “the BoE’s core measure service prices momentum has been sticky over the past few months.”

Price pressures further up the supply chain are another concern for Nomura, which notes that “upstream prices also surprised on the upside.” The analysts describe wholesale goods price increases as “dominated by a rise in energy costs,” while observing that “core prices rose at a more modest pace.” They also caution that “upstream service prices are signalling a further increase in consumer prices,” highlighting the risk that these pressures could again feed through to households.

These developments have prompted Nomura to revise its BoE outlook. As the bank explains, “a combination of sticky inflation, a resilient labour market, strong economic growth and persistently elevated energy prices has led us to change our view on the BoE.” Further tightening is now its expectation: “We now see rate hikes in November and February, which is still a more dovish outcome than markets are pricing.”

Friday’s releases will draw investors’ attention to September UK Retail Sales and the preliminary October S&P Global PMI readings for the UK and the United States (US).

GBP/USD Technical Analysis: Can the Pair Clear Retracement Resistance?

Trading at 1.3404 on the daily chart, GBP/USD has regained a near-term bullish bias by holding above its 20-day Exponential Moving Average (EMA) of 1.3313. Price lies between the 38.2% and 50.0% Fibonacci retracements of the recent decline, with the latter providing an overhead barrier at 1.3409. As the pair challenges this key retracement resistance, the Relative Strength Index (RSI), at 58.6, is moving into positive territory and signalling a recovery in upward momentum.

The first upside hurdle is the 50.0% Fibonacci retracement at 1.3409. Beyond it lie the 61.8% retracement near 1.3472 and the 78.6% level around 1.3562, followed further up by the recent swing high of 1.3677. If the pair weakens, the 38.2% Fibonacci retracement at 1.3345 offers initial support, before the 23.6% level around 1.3267. A more pronounced retreat would bring the structural support near 1.3140 into view.

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

Economic Data Indicator

Consumer Price Index: Year-on-Year (YoY)

Published monthly by the Office for National Statistics, the United Kingdom (UK) Consumer Price Index (CPI) tracks consumer price inflation: the rate at which prices of goods and services purchased by households increase or decrease. Compiled to international standards, it is the inflation measure used for the government’s target. The YoY figure compares prices in the reference month with those a year earlier. A high reading is generally viewed as supportive of the Pound Sterling (GBP), whereas a low reading is considered negative for the currency.

Explore further.

Latest release: Wed 21 October 2026 06:00

Release frequency: Monthly

Reported figure: 3.5%

Consensus forecast: 3.4%

Prior reading: 3.1%

Data source: Office for National Statistics

Why does this release matter for traders?

A reading above market expectations generally supports GBP. The monthly release is important because the Bank of England has a mandate to keep inflation, measured by the headline Consumer Price Index (CPI), at around 2%. Rising inflation implies that the BOE would raise interest rates sooner and at a faster pace, or scale back bond purchases, thereby constraining the supply of pounds. By contrast, a slowdown in price increases points to looser monetary policy.