Sterling Advances as Traders Await Fed Decision and UK GDP Data

Key Moments

Technical Overview: Sterling Extends Its Recovery

The GBP/USD pair is trading with a firmer tone near 1.3305 in early European dealings, maintaining positive momentum above the 1.3300 handle. The move reflects a weaker Greenback against the Pound Sterling as markets look ahead to a widely anticipated US Federal Reserve rate cut on Wednesday, while the next UK monthly Gross Domestic Product (GDP) release is due on Friday.

A break higher during the overnight session through the 1.3275-1.3280 area – a zone that combined the 200-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement of the September-November decline – has been a pivotal catalyst for GBP/USD buyers. This clearance is underpinning a constructive technical bias.

With daily chart oscillators staying in positive territory, additional upside beyond the 1.3365 region, which corresponds to the 50% Fibonacci retracement, could pave the way for a retest of the 1.3400 figure. Should the advance persist, the pair may then target the 61.8% retracement band around the 1.3455-1.3460 horizontal barrier, ahead of the 1.3500 psychological level.

Key Technical Levels

On the downside, any corrective move is expected to encounter initial support around the 1.3300 round figure, ahead of the 1.3380-1.3375 area, which now acts as a resistance-turned-support breakpoint. A deeper decline is likely to be viewed as a dip-buying opportunity and may be contained near the 1.3225 region.

The 1.3200 level sits just below and is a critical threshold for the broader constructive outlook. A decisive break lower would invalidate the positive near-term structure and shift the bias in favor of sellers, potentially accelerating losses toward the 1.3145-1.3140 intermediate support band and then to levels below 1.3100.

Fundamental Drivers: Fed and BoE Expectations in Focus

From a macro perspective, interest rate expectations are central to the current GBP/USD dynamics. Market participants assign nearly a 90% probability that the US Federal Reserve will cut its benchmark overnight rate by 25 basis points at the end of its two-day policy meeting on Wednesday. Such a move would mark the third reduction this year and would bring the target range to 3.50%-3.75%.

However, investors are bracing for what has been characterized as a “hawkish cut,” with cautious forward guidance. The Fed is seen as potentially signaling a pause in early 2026 in response to ongoing inflation concerns and a labor market that remains resilient. This stance could lend some support to the US Dollar and act as a counterweight to further GBP/USD gains.

On the UK side, worries about higher overall tax burdens following the UK autumn budget, combined with softer inflation readings and signs of a cooling labor market, reinforce expectations of further adjustments in Bank of England (BoE) policy. Financial markets are currently assigning a high probability around 88% to a 25 basis point cut at the upcoming BoE December meeting, following data that suggest easing inflation pressures, according to the CME FedWatch tool.

Weekly GBP/USD Outlook

SPECIAL WEEKLY GBP/USD FORECAST

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GBP/USD: Pound Sterling retains bullish bias ahead of Fed verdict

The Pound Sterling (GBP) recovery gathered steam against the US Dollar (USD), driving GBP/USD to fresh five-week highs above the 1.3350 level.