GBP/USD Price Forecast: Downside pressure could intensify below 1.3180

The British Pound (GBP) experienced a 0.18% decrease, trading at approximately 1.3248 against the US Dollar (USD) during the initial European trading session on Wednesday. The USD gained strength ahead of the release of Federal Open Market Committee (FOMC) minutes from the September policy meeting, which is set to occur at 18:00 GMT.

As of now, the US Dollar Index (DXY), which measures the Greenback's value against six major currencies, is up 0.22%, trading around 102.07. Investors will be closely watching the FOMC Minutes to gain insights into the Federal Reserve's (Fed) monetary policy outlook. Currently, the CME FedWatch tool indicates an 81% probability that the Fed will maintain interest rates unchanged during the upcoming meeting.

In recent times, financial markets have reduced their bullish expectations for the Fed due to weak Nonfarm Payrolls (NFP) data for September and hints from the Fed suggesting no rush for another rate increase. In its September rate hike, the Fed's William delivered a moderately hawkish statement, scoring 6.4/10 on the FXS Speechtracker, slightly higher than the historical average of 6.2/10, suggesting continuity rather than a shift in tone.

The focus on the "no need for urgency" after the September rate hike, along with data dependence and the likelihood of one more rate hike this year, points to a cautious yet tightening-biased stance. This stance is supported by the need to bring inflation back to the 2% target and apprehensions regarding AI-related price pressures.

Projections of inflation suggest it may not reach the target until 2028, with unemployment expected to be at 4% over the course of 2027. This indicates that the Fed may need to maintain restrictive policies for an extended period, despite strong and potentially strengthening US economic momentum. The FXS Fed Sentiment Index dropped by 1.43 points to 144.29, signaling a slight decrease in the perception of hawkishness, although the index still remains well above the neutral 100 mark.

In the daily chart, GBP/USD is currently trading at 1.3247, which has breached below the 20-period exponential moving average (EMA) at 1.3315, signaling a bearish near-term bias. The RSI is around 39, indicating persistent selling pressure without being overextended. On the upside, the immediate resistance is found at the 20-day EMA at 1.3315, and a close above this level would help alleviate the current downtrend.

On the downside, the October 1 low at 1.3181 represents the immediate support level; a breakdown below this level could expose the pair to the yearly low near 1.3140.