GBP/USD Price Forecast: Key moving average caps upside despite firm footing above 1.3350

• Gains in GBP/USD keep the pair near 1.3385 as Monday’s European session gets under way.
• Trading below the 100-day SMA leaves the outlook bearish, although neutral RSI momentum means further consolidation remains possible.
• On the upside, 1.3395 is the first target in focus, while 1.3355 offers the nearest support.

Sterling finds some support against the US Dollar (USD) from a hawkish Bank of England (BoE) rate increase, lifting GBP/USD towards 1.3385 in early European trading on Monday. The move lends support to the British Pound (GBP).

For the first time in over three years, the UK central bank raised its benchmark interest rate, increasing it by 25 basis points (bps) to 4.00%. According to BoE Governor Andrew Bailey, the Middle East war and the resulting rise in energy prices are the principal considerations for future rate decisions.

Although oil prices declined as markets reacted to the US midterms, Bailey said this would not have altered the decision. He acknowledged, however, that it "obviously" affects his assessment of the outlook.

The BoE’s growth and inflation forecasts now put growth this year at 1.6% and next year at 1.3%, following upward revisions. Both projections are stronger than those of the government's Office for Budget Responsibility.

Can Sterling hold steady as BoE rates match the Fed range and inflation risks persist?

A further round of BoE tightening brought a rate increase 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. They describe strong committee backing, with "eight members" supporting the decision and "one preferred a 50-bps increase," highlighting the continuing hawkish bias.

Geopolitics remains an important condition shaping the BoE’s policy trajectory, according to ABN Amro. 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,".

Does greater rate uncertainty from BoE’s Pill cloud the Pound outlook?

A more guarded message, delivered with less conviction, is indicated by FXS Speechtracker’s score of 4.2/10, markedly below Pill’s historical average of 6.4/10. The speech emphasises that next year’s interest rates are not predetermined and rules out a preset rising trajectory from spring. This represents a dovish turn from the tightening bias implied earlier.

Downside risks for the Pound are reinforced by the prospect of Bank Rate remaining unchanged, or even declining if growth falters, alongside the emphasis on pressure on margins as a key determinant. Linking policy to corporate pressures and the growth outlook, this conditional approach encourages markets to scale back expectations of prolonged rate increases and reconsider carry trades that support the Pound.

Technical Analysis: Can GBP/USD shake off its bearish bias below the 100-day SMA?

GBP/USD faces a mildly bearish bias on the daily chart, with gains constrained just below the 100-day simple moving average (SMA). Prices remain in the upper half of the Bollinger envelope, while nearby support comes from the 20-day SMA, or middle band. At 52.5, the Relative Strength Index (14) is near neutral, suggesting consolidation rather than a clear continuation of the trend.

The 100-day SMA at 1.3395 presents the first resistance, ahead of a more substantial hurdle at the upper Bollinger band near 1.3490. Sustained buying beyond that barrier could take the pair towards the 15 July high of 1.3558. 

The middle Bollinger band near 1.3355 provides the closest support, with the 28 October low of 1.3272 next in line. A sharper retreat would bring the lower Bollinger band around 1.3225 into focus. 

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