**Pound to Dollar Forecast: GBP Struggles at Resistance, Huge Fed Risk Looms**
*Original author: James Skinner (currencynews.co.uk)*
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The British Pound (GBP) has endured a choppy trading period against the US Dollar (USD), as key resistance levels and looming risks from the US Federal Reserve’s policy decisions present considerable headwinds for GBP/USD bulls. Heading deeper into September, forex market participants are closely watching developments from both sides of the Atlantic, with economic data releases and central bank policy cues driving price action in the world’s most-traded currency pair.
The exchange rate narrative remains strongly influenced by the monetary policy divergence between the Federal Reserve and the Bank of England (BoE), as well as by prevailing risk sentiment in global markets. As the Pound finds itself capped below significant resistance, the Dollar’s own outlook is intrinsically tied to upcoming decisions from the Fed regarding inflation and interest rates.
This comprehensive analysis delves into the current market dynamics, technical levels, central bank outlooks, and the possible scenarios facing the GBP/USD rate in the coming weeks.
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## GBP/USD Technical Outlook: Key Resistance Levels in Focus
The GBP/USD exchange rate has staged a series of attempted rallies in recent sessions but consistently faltered at pressing through defined resistance thresholds.
– **Resistance Zone:** The pair faces a notable barrier near the 1.2550 to 1.2600 price area. Several attempts to clear this band have led to swift rejections, reinforcing its credibility among technical traders.
– **Support Levels:** On the downside, short-term support is observed around 1.2450, with further cushions towards the 1.2370 and 1.2300 handle.
– **Moving Averages:** The 50-day and 200-day moving averages are converging near the current spot rate, suggesting a potential inflection point.
– **Momentum Indicators:** Relative Strength Index (RSI) and MACD signals are mixed, indicating market indecision rather than a strong directional conviction.
In summary, the UK currency appears trapped in a tight range, hemmed in by robust resistance above and moderate support below. Market technicians view a decisive breakout from this band as pivotal for the next sustained directional movement.
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## Fundamental Drivers: UK Data, BoE Policy, and Market Confidence
Beyond chart signals, Sterling’s direction hinges on a suite of macroeconomic influences and central bank expectations:
### UK Economic Data
A string of UK releases has painted a mixed economic picture, tempering BoE hawkishness and weighing on the Pound:
– **Inflation:** The latest Consumer Price Index (CPI) showed a gradual easing in price pressures, though headline inflation remains above the BoE’s target.
– **Growth:** GDP readings have signaled tepid growth, raising concerns over stagflation—a combination of stagnating output and high inflation.
– **Employment:** Labour data releases have been in line with market expectations, but wage growth has begun to slow, dampening fears of a wage-price spiral.
– **Retail Sales:** Consumption data hints at cautious consumer spending, reflective of higher borrowing costs and cost-of-living pressures.
### Bank of England Outlook
After a long cycle of rate hikes, the Bank of England has pivoted to a more cautious stance:
– **Interest Rate Pause:** The BoE has signaled potential pauses in rate increases, worried about overtightening as headline inflation shows tentative signs of peaking.
– **Forward Guidance:** MPC communications have been careful, emphasizing data dependence and a willingness to resume tightening if inflation proves sticky.
– **Dovish Risks:** Lackluster growth data increases the risk of an earlier-than-expected rate cut, especially if recession risks materialize in late 2024.
This balancing act has undermined strong support for the Pound, discouraging aggressive bets on GBP appreciation.
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## Dollar Dynamics: Fed Policy and Global Risk Sentiment
The US Dollar’s trajectory remains dictated by investor perceptions about the
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