**GBP/USD Price Forecast: Sterling Holds 1.3475 as BoE Faces Inflation Test**
*By TradingNews.com Staff, original reporting by Ross J. Burland*
The British Pound (GBP) is navigating turbulent waters in the forex arena, holding firm above the 1.3475 support line against the US Dollar (USD). These movements capture the attention of global investors as they weigh the Bank of England’s (BoE) battle with surging inflation and its subsequent policy moves.
In the ever-volatile GBP/USD market, the interplay between economic data from both the UK and the United States, central bank policy shifts, and geopolitical risks are as pronounced as ever. This in-depth forecast examines the outlook for Sterling, focusing on the pivotal role of the 1.3475 support level, the inflation dilemma challenging the BoE, and the scenarios that could unfold for GBP/USD through the coming weeks.
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## GBP/USD Technical Outlook
The GBP/USD pair is currently demonstrating resilience after confronting a sharp sell-off, with support materializing near 1.3475. This zone has emerged as a critical threshold for Sterling bulls, who are keenly defending it amid a global risk-off environment.
### Key Technical Levels
– **Immediate Support**: 1.3475. This area has absorbed multiple attempts from sellers and stands as the linchpin of near-term Sterling stability.
– **Resistance Levels**:
– 1.3550: Recent swing highs have capped upside moves.
– 1.3600: A psychological and technical barrier, closely aligned with the 50-day moving average.
– 1.3725: The April high and key resistance should momentum accelerate.
– **Moving Averages**:
– The 200-day moving average, now at approximately 1.3700, remains a magnet for medium-term targets if buyers regain control.
### Chart Patterns
Price action analysis reveals a persistent bearish undertone since late 2023, reflected in a series of lower highs and lower lows. However, the ability of bulls to secure the 1.3475 handle is notable. If GBP/USD closes below this key level, it could open the path to the 1.3400 region, where further buying interest may emerge.
Conversely, a decisive move above 1.3550 and especially 1.3600 would shift sentiment and invite further upside as short-term traders exit bearish positions.
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## Macro Drivers: BoE and the Inflation Conundrum
At the heart of Sterling’s challenges is the Bank of England’s policy quandary. Inflation in the UK remains stubbornly high, outpacing the central bank’s target and pressuring policymakers to maintain an assertive stance on interest rates.
### Key Economic Themes Impacting GBP/USD
– **UK Inflation Remains Sticky**
– Headline inflation in the UK continues to exceed the BoE’s 2 percent target, driven by persistently strong wage growth and elevated energy costs.
– Despite easing price pressures globally, core inflation readings in the UK (which exclude more volatile food and energy prices) remain historically elevated.
– **Monetary Policy Uncertainty**
– The BoE has hiked rates aggressively since late 2021, but markets now question whether further tightening is on the table.
– Recent guidance from Gov. Andrew Bailey suggests a data-dependent approach. Still, with inflation sticky, traders are wary of premature dovish pivots that could weigh on the Pound.
– **UK Economic Growth Risks**
– Higher rates have increased mortgage and borrowing costs, with signs that UK consumer sentiment is becoming fragile.
– Purchasing Managers’ Index (PMI) surveys indicate slowing momentum as services and manufacturing struggle with higher input costs and weak domestic demand.
– The risk of stagflation—where inflation remains elevated even as growth falters—cannot be discounted.
– **Fiscal Policy and Geopolitical Factors**
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