**GBP/USD Price Forecast: Sterling Holds 1.35 as Fed Pivot Offers Relief Amid UK Fiscal Strain**
*By Daniel Cuthbertson, TradingNews.com*
The British pound is exhibiting remarkable resilience against the US dollar, holding above the critical 1.35 threshold even as the UK grapples with fiscal pressures and uncertainty around economic growth. Recent market dynamics have centered on the Federal Reserve’s evolving policy stance, which has shifted the landscape for major currency pairs and provided a measure of support to Sterling despite its domestic headwinds.
## Market Context: Fed Pivot Alters Global Forex Dynamics
Investors have kept a close watch on the December meeting of the US Federal Reserve. After a year marked by aggressive rate hikes and a focus on combating inflation, the Fed signaled a potential pause and a more data-driven approach for future policy moves. This “dovish pivot” sent ripples across financial markets, triggering a broad-based weakening of the US dollar.
Key drivers of the current backdrop include:
– **Fed Signaling Policy Reassessment**: Chairman Jerome Powell and other officials have underscored the importance of incoming economic data, indicating that the path of further tightening is no longer predetermined.
– **US Disinflation Trends**: Several leading inflation indicators in the US are showing signs of moderation, fueling hopes the Fed will soon call a halt to its hiking cycle.
– **Yield Differentials**: US Treasury yields have dropped from multi-year highs, diminishing the dollar’s yield advantage over its major peers, including the pound.
As the dollar corrects from recent highs, major G10 currencies have seen relief—Sterling chief among them.
## Sterling’s Landscape: Domestic Woes and Resilience
Despite global tailwinds, the pound remains under the shadow of persistent UK-specific challenges. The British economy continues to face sluggish growth, high inflation, and mounting fiscal strain linked to government spending measures and stubbornly high energy prices.
Key domestic concerns influencing Sterling:
– **Fiscal Pressures**: The UK government’s budget deficit has widened as pandemic recovery efforts and cost-of-living measures strain public finances. Borrowing costs have risen, and market participants remain wary of the sustainability of government support programs.
– **Economic Growth Concerns**: Data releases paint a mixed picture. While the labor market remains relatively tight, business surveys indicate faltering momentum. Consumer spending is being squeezed by inflation and higher interest rates.
– **BoE Policy Response**: The Bank of England faces a delicate balancing act. While it has matched the Fed’s pace of hikes throughout much of 2023, it now confronts calls to temper policy tightening to avoid exacerbating a potential recession.
## GBP/USD Technical View: Key Levels and Chart Outlook
The GBP/USD pair’s performance since early December has caught the attention of technical analysts. After dipping toward 1.33 during the worst bout of dollar strength, Sterling has steadied and reclaimed the 1.35 handle. The 1.35 level is widely regarded as a significant technical threshold, with price action above this area signaling bullish momentum.
**Key technical levels for GBP/USD:**
– **Immediate Support**: 1.3450 to 1.3475. Repeated tests of this zone in recent sessions have seen meaningful buying interest.
– **Critical Resistance**: 1.3600 to 1.3650. This region marks the December high and could cap upside attempts absent a clear fundamental catalyst.
– **Momentum and Indicators**: Momentum oscillators such as the Relative Strength Index (RSI) are pointing higher but not yet in overbought territory, which suggests room for further gains if supportive news emerges.
– **Moving Averages**: Sterling remains above its 50-day and 200-day moving averages, indicating a constructive medium-term outlook.
– **Longer-Term Trend**: While the pair has not fully reversed the decline seen after the “mini-budget” crisis of late 2022, stability above
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