- GBP/USD outlook remains neutral to bullish ahead of the key Fed decision.
- Pound stays influenced by cooling CPI and labor markets, reinforcing BoE cut next week.
- Markets await today’s weekly ADP and JOLTS data for fresh impetus.
The GBP/USD price remains well bid above 1.3300 in Tuesday’s London session, supported by broad dollar weakness and improving UK macroeconomic sentiment. However, the upside remains limited ahead of significant central bank risk this week. The pair attracted buying traction in the Asian session after Monday’s directionless trading. However, the market participants stay cautious ahead of the BoE and Fed decisions.
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The British pound is under pressure amid concerns about higher overall taxes in the UK’s autumn budget, combined with cooling inflation and a weakening labor market. Markets now price in a 90% probability of a 25-basis-point BoE rate cut to 3.75%, marking a potentially sixth cut since August 2024. The recent CPI data reinforced expectations of further easing after the headline inflation slipped to 3.6% YoY in October.
At the same time, the UK growth outlook was upgraded by the OECD, and it is projected that the BoE will end the easing cycle by Q2 2026. This development provides a medium-term support to the sterling. The mixed backdrop keeps the pound bid, but traders avoid aggressive positioning before next week’s BoE decision.
On the other hand, the US dollar remains under pressure, failing to extend last week’s recovery as traders stay sidelined ahead of Wednesday’s FOMC decision. Fed funds futures imply a 90% probability of a 25-basis-point rate cut to a range of 3.50% to 3.75%.
Although the cut is widely expected, the focus is on whether Fed Chair Powell delivers a hawkish cut or a rate reduction accompanied by cautious forward guidance. The updated Summary of Economic Projection and dot plot will be key to assessing the Fed’s easing path in 2026.
GBP/USD Key Data Today
Traders will be closely watching today’s ADP Weekly Employment and JOLTs Job Openings report for fresh momentum. However, the meaningful moves might not be seen until the Fed event risk passes.
GBP/USD Technical Outlook: Lacking Directional Bias
The GBP/USD 4-hour chart shows no clear bias as the RSI points upwards above the 50.0 level, but the price action stays lulled near the 20-period MA. A significant move above the 20-period MA around 1.3340 could gather bullish momentum and look to test the last week’s highs near 1.3385.
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On the flip side, the price could slip below the 20-period MA and test the demand zone confluence with the 50-period MA under 1.3300. The markets currently lack a clear bias, awaiting a catalyst to stimulate price action.
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