• The US Dollar Index drops, boosting GBP/USD as traders await the Federal Reserve rate decision.
• UK economic outlook improves after Autumn Budget, but BoE rate cut seen as likely.
• Technical analysis shows GBP/USD testing key moving averages for further gains.

The Pound Sterling (GBP) advances during the North American session on Wednesday as the US Dollar (USD) weakens on the expectation that the Federal Reserve (Fed) will cut rates later in the day. At the time of writing, GBP/USD trades at 1.3336 after bouncing off daily lows of 1.3296.

GBP/USD climbs amid US Dollar weakness and central bank rate cut expectations

The financial markets seem to be paused, with traders keeping their powder dry waiting for the Fed. Nevertheless, the US Dollar Index (DXY), which tracks the performance of the buck’s value against a basket of six other currencies, is down 0.21% at 99.03, providing a tailwind for Cable.

Data in the US had shown mixed signals, with inflation halting its advance towards the 3% threshold as measured by the Core PCE Price Index, while the most recent jobless claims readings hinted that the labor market is in a no-hiring, no-firing environment.

On Tuesday, the ADP Employment Change 4-week average showed that companies hired an average of 4,750 people in the four weeks ending November 22, an improvement compared to the prior reading. Also, job vacancies rose, as stated by the JOLTS report for October.

Regarding the UK economy, the markets were relieved after the Autumn Budget. Last week’s flash PMIs reading showed that the economy is faring better than expected, yet the Bank of England is expected to reduce rates at next week’s meeting.

Capital Edge shows odds for a 25 bps rate cut by the BoE are nearly 92% for the December 18 meeting, with traders also pricing an additional rate cut for 2026.

What to expect at the Fed meeting?

Traders had priced in a 'hawkish cut' by the Fed. Of interest would be the economic projections for the next year, regarding the Unemployment Rate, the Core PCE figures, and the path for the Fed funds rate. After the initial reaction, Chair Jerome Powell’s press conference will set the stage for Q1 2026, as he will not be tapped to remain the Fed Chair for another period.

GBP/USD Price Forecast: Technical outlook

GBP/USD remains neutral to upward biased, with trades testing the 200-day SMA at 1.3333. A breach of the latter exposes the 100-day SMA at 1.3358, followed by 1.3400. On the flip side, the first support is 1.3300, followed by the 50-day SMA at 1.3255 and the 20-day SMA at 1.3210.