Original article credit: Trading News – “GBP/USD Price Forecast: Pound Holds 1.3450 as Fed-BoE Split Keeps Bulls Aiming for 1.3700”
Title: GBP/USD Outlook: Pound Supported Above 1.3450 as Policy Divergence Fuels Bullish Momentum Toward 1.3700
The British pound remains well-supported above the 1.3450 level against the US dollar as market participants continue to digest the diverging policy approaches between the Bank of England (BoE) and the US Federal Reserve (Fed). This divergence has contributed to renewed bullish momentum for GBP, with traders eyeing a potential breakout toward 1.3700 in the medium term.
Summary of Key Developments:
– GBP/USD has maintained strength above the key support level of 1.3450 despite fluctuating risk sentiment and hawkish rhetoric from the Federal Reserve.
– Differing stances between the BoE and Fed provide a fundamental catalyst for continued bullish bias in the pound.
– Technical indicators remain constructive, supporting expectations for a rally toward 1.3700 in the sessions ahead.
– Upcoming UK and US macroeconomic releases could provide additional directional cues.
Market Context:
Over the past few weeks, the GBP/USD currency pair has demonstrated resilience, buoyed by a combination of improving UK economic data, speculation of further BoE rate hikes, and a subtle retreat in the Federal Reserve’s tightening pace. Traders have taken notice of the growing divergence between the two central banks, which presents opportunities for directional plays.
While the Fed continues to emphasize the need to fight inflation with higher interest rates for an extended period, recent data has shown signs that the US economy may be slowing, leading to a more cautious tone from some Federal Open Market Committee (FOMC) members. In contrast, the BoE remains more hawkish, signaling that further tightening could be warranted due to stubborn inflation persisting above-target levels in the UK.
BoE-Fed Policy Divergence:
The diverging outlook between the Federal Reserve and the Bank of England is a key dynamic underpinning recent strength in the British pound. Analysts are closely watching the monetary policy paths of both central banks, with traders factoring in these differences as they adjust their positions.
BoE Outlook:
– UK inflation remains well above the BoE’s 2 percent target
– The BoE has already raised interest rates multiple times in the current cycle
– Expectations are growing for further tightening if inflationary pressures persist, especially in the services sector
– Governor Andrew Bailey and other Monetary Policy Committee (MPC) members have maintained a relatively hawkish tone, emphasizing the need to remain vigilant
Fed Outlook:
– Although the Fed has also delivered numerous rate hikes, some FOMC members have started to signal a more cautious stance
– US inflation, while elevated, is showing signs of softening, especially in energy and goods
– The Fed has hinted at a possible pause or slowdown in the rate hike pace depending on incoming data
– This policy recalibration has reduced the yield advantage for the US dollar, thereby lifting GBP/USD
Technical Setup:
From a technical analysis perspective, GBP/USD remains in a bullish formation supported by multiple indicators. The recent bounce off the 1.3450 area underscores the pair’s near-term resilience, with room for further upside if buyers maintain control.
Bullish Technical Factors:
– The 50-day Exponential Moving Average (EMA) remains above the 200-day EMA, suggesting a positive medium- to long-term trend
– Momentum indicators such as the Relative Strength Index (RSI) are hovering in the neutral-to-overbought territory, allowing for further upside before reaching exhaustion
– A breakout above the 1.3600 resistance area could open the door to a test of the psychological 1.3700 level
– The absence of significant selling pressure on recent pullbacks supports the notion of underlying demand for the British pound
Levels to Watch:
– Support: 1.
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