GBP/USD Price Forecast: Trades firmly above 1.3350 as key moving average caps gains

• At around 1.3385, GBP/USD remains in positive territory in early European trading on Monday.
• Trading beneath the 100-day SMA leaves the pair with a bearish bias, although neutral RSI momentum means further consolidation remains possible.
• Resistance at 1.3395 is the first upside objective, while 1.3355 marks initial support.

A hawkish interest rate increase by the Bank of England (BoE) lends some support to the British Pound (GBP) against the US Dollar (USD), with GBP/USD strengthening towards 1.3385 in Monday’s early European session.

A 25 basis point (bps) rise takes the UK central bank’s benchmark interest rate to 4.00%, its first increase in more than three years. According to BoE Governor Andrew Bailey, the Middle East war and the resulting rise in energy prices are the principal consideration for future rate decisions.

The fall in oil prices as markets reacted to the US midterms would not have altered the decision, Bailey said. He nevertheless acknowledged that it "obviously" affects his outlook.

In its growth and inflation forecasts, the BoE raised its growth projections for this year and next to 1.6% and 1.3%, respectively. Both exceed the forecasts from the government’s Office for Budget Responsibility.

Sterling stabilises as BoE rate rise aligns with Fed range amid persistent inflation risks

The latest tightening move brought a rise in Bank Rate of "25 bps to 4.00%, matching the upper bound of the 3.75-4.00% Fed Funds Rate range.", analysts at ABN Amro point out. Support across the committee was strong: "eight members" voted for the move, whereas "one preferred a 50-bps increase," highlighting the continued hawkish bias.

Geopolitical developments remain a central condition for the BoE’s policy trajectory, ABN Amro suggests. The bank notes that the MPC "projected inflation to reach around 5% by mid-2027 and signalled another increase unless the Middle East conflict is resolved,".

Pound outlook faces pressure as BoE’s Pill highlights rate uncertainty

At 4.2/10, the FXS Speechtracker score is substantially below Pill’s historical average of 6.4/10, indicating a more guarded message with less conviction. His insistence that next year’s interest rates are not predetermined, alongside his rejection of a fixed upward trajectory from spring, represents a dovish departure from the tightening bias previously implied.

Downside risks for the Pound are reinforced by the prospect of Bank Rate remaining unchanged, or even being cut if growth falters, together with the emphasis on pressure on margins as a key consideration. By making future policy conditional on corporate pressures and growth trends, this approach encourages markets to scale back expectations of prolonged rate increases and reconsider carry trades that support the Pound.

Technical Analysis: GBP/USD Remains Bearish Below the 100-Day SMA

With GBP/USD sitting just below the 100-day simple moving average (SMA), the daily chart continues to show a mildly bearish bias and constrained upside. Prices remain in the upper half of the Bollinger envelope, while the 20-day SMA, its middle band, provides support close by. A Relative Strength Index (14) reading of 52.5 is near neutral, suggesting consolidation rather than a clear continuation of the trend.

The 100-day SMA at 1.3395 provides the first resistance on the upside. Beyond that, the upper Bollinger band near 1.3490 presents a firmer obstacle; sustained buying above it could lift the pair towards the 15 July high of 1.3558. 

Immediate downside support lies around 1.3355 at the middle Bollinger band, ahead of the 28 October low of 1.3272. Should the retreat deepen, the lower Bollinger band near 1.3225 would become the next downside objective. 

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