GBP/USD Price Forecast: Declines to near 1.3250 as bearish bias persists below 100-day moving average

The GBP/USD currency pair fell to around 1.3250 early Thursday in European trading hours. The British Pound (GBP) slipped against the US Dollar (USD) due to widening differences in monetary policies between the Bank of England (BoE) and the US Federal Reserve (Fed). Investors will be monitoring the US weekly Initial Jobless Claims report and Fed's speeches throughout the day.

BoE policymaker Alan Taylor expressed uncertainty on whether a single rate hike would effectively curb inflation without sparking unfounded market expectations of more increases. Traders estimate that the BoE will tighten monetary policy by nearly 33 basis points (bps) by year-end, and over 100 bps by the end of 2027, according to LSEG-compiled data.

However, analysts generally anticipate more cautious action. US Personal Consumption Expenditures (PCE) inflation data, which turned out softer than expected, pulled down the Greenback and supported the major pair. The probability of a rate hike in October has dropped to about 38.2%, down from roughly 45% before the US PCE data, according to the CME FedWatch Tool.

MUFG analysts highlight that UK growth prospects have improved, with the bank raising their Q3 growth forecast to 0.4% from 0.1% projected in July. They believe stronger growth could prompt the BoE to tighten policy sooner if rising energy prices remain problematic. Additionally, a senior official at the central bank perceives risks to the inflation outlook as more favorable.

Beyond short-term policy implications, MUFG notes the evolving political landscape, indicating that increased openness to closer EU ties could eventually lead to a potential reverse-Brexit trade advantage for the pound. Fed's Kashkari delivered a more hawkish message, scoring 7.1/10 on the FXS Speechtracker, higher than the historical 6.2/10 average, reflecting concerns that inflation near 3% remains "too high" despite recent data.

The Fed's emphasis on a robust economy, robust consumer spending, and high job availability, combined with doubts about the adequacy of current policy settings and a potentially higher neutral rate, fuels a bias toward further tightening. This hawkish stance is evident in the Fed Sentiment Index, which slipped by 0.42 points to 143.28, still indicating a clear hawkish stance even though it has slightly softened compared to recent readings.

In technical analysis, GBP/USD exhibits a bearish near-term bias, trading below the 100-day simple moving average and the Bollinger Bands 20-period middle band. The pair is nearing the lower Bollinger band, while the Relative Strength Index (RSI) sits at 33.20, just above the oversold threshold, signaling persistent downside momentum that may be nearing an end.

On the downside, an immediate support level is at the September 29 low of 1.3202, followed by the Bollinger lower band near 1.3140. A daily close below this level could expose the November 20, 2025 low of 1.3038 and the psychological 1.3000 level. Conversely, initial resistance is positioned at the September 30 high of 1.3311, leading to the Bollinger middle band at 1.3385, and the 100-day SMA at 1.3415.

A distant upside barrier is at the upper Bollinger band around 1.3630. The Pound Sterling, the oldest currency in the world (dating back to 886 AD) and the official currency of the United Kingdom, is the fourth most traded currency in foreign exchange markets, accounting for 12% of all transactions, averaging $630 billion daily in 2022.

Its primary trading pairs include GBP/USD (known as 'Cable'), GBP/JPY, and EUR/GBP. The value of the Pound Sterling is primarily influenced by monetary policy set by the Bank of England, which aims for "price stability" with an inflation rate around 2%. The BoE raises interest rates to curb high inflation, making the UK more attractive for global investment.

Conversely, if inflation falls too low, the BoE may lower rates to stimulate economic growth. Economic data releases, such as GDP, Manufacturing and Services PMIs, and employment figures, can impact the Pound Sterling's value. A strong economy attracts foreign investment and may lead to higher interest rates, strengthening the GBP.

Weak economic data, on the other hand, typically results in a falling Pound Sterling. The Trade Balance, which measures the difference between a country's exports and imports, is another crucial data release for the Pound Sterling.