GBP/USD Price Forecast: At make or a break around 1.3500

The British Pound (GBP) experienced a notable decline against the US Dollar (USD), settling around 1.3470 during the early European trading session on Monday, marking a 0.1% drop. This downward trend was fueled by reassessments of the Bank of England (BoE) interest rate expectations following their monetary policy announcement on Thursday.

Deutsche Bank analysts highlighted that the BoE was not "edging towards a rate hike," leading to a reduction in investors' confidence regarding any potential September rate hikes. With the probability of a September move falling from 60% to 30%, the market's conviction in further tightening has been significantly tempered. The BoE had left interest rates unchanged at 3.75% earlier in the week, with a 6-3 majority, and had stated that rate hikes would be necessary if risks in the Middle East persisted and inflation's second-round effects emerged.

However, BoE Governor Andrew Bailey emphasized during a press conference that the current inflation situation was less severe than initially anticipated. Despite this, GBP/USD continues to trade below the pivotal 1.3470 level, a critical psychological barrier that could determine the pair's next move. Traders are optimistic about a bullish near-term bias, as GBP/USD holds above its 20-period exponential moving average (EMA) at 1.3389.

The Relative Strength Index (RSI) at 59 signals a positive bias, although it has not yet indicated overbought conditions. GBP/USD faces resistance at the psychological level of 1.3500, a break above which could strengthen bullish momentum towards the July high of 1.3558.