**GBP/USD Forecast: Pound Eyes 1.34 Breakout as Fed Cut Bets Weaken Dollar**
*As originally reported by Skerdian Meta on FXLeaders*
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As global central banks steer their monetary policy amid shifting macroeconomic backdrops, major currency pairs are at a crossroads. None is being watched more closely right now than the GBP/USD, which is eyeing a significant breakout above the 1.34 level. A weakening US Dollar, driven by growing expectations of Federal Reserve interest rate cuts, underpins this rally, while the British Pound’s resilience showcases market optimism about the UK’s economic recovery. In this analysis, we break down the factors driving the GBP/USD pair, explore the technical setup, and assess the fundamental landscape shaping the short- and medium-term outlook.
## Key Drivers Behind GBP/USD’s Latest Rally
### 1. **Federal Reserve Policy Shift and Dollar Weakness**
– Market speculation is mounting that the Federal Reserve may pivot towards an accommodative stance sooner than previously anticipated.
– Inflation data out of the US, while still above the target, has shown signs of cooling, prompting traders to bet on rate cuts as early as Q1 2025.
– US Treasury yields have declined, diminishing the carry appeal of the Dollar versus riskier and higher-yielding alternatives.
### 2. **UK Economic Resilience and Stabilizing Political Scene**
– Despite ongoing challenges from post-Brexit trade adjustments, the UK economy has avoided recession, beating some bleak forecasts from earlier in the year.
– Economic indicators such as employment figures, retail sales, and services PMIs have outpaced expectations in recent months.
– The relative stability in the UK’s political landscape is helping to shore up investor confidence, with government fiscal policy viewed as more predictable.
### 3. **Interest Rate Differentials**
– The waning expectation for further Federal Reserve hikes, coupled with the Bank of England’s somewhat more hawkish rhetoric, narrows the interest rate gap.
– While the Bank of England is not expected to aggressively hike in the near term, it is also not signaling a rush to cut, supporting the Pound’s yield advantage.
## Technical Analysis: GBP/USD Poised for Breakout
GBP/USD has been trading within a well-defined consolidation pattern but is now exhibiting bullish momentum as it tests overhead resistance near 1.34. The technical picture corroborates the fundamental bullish narrative.
### Support and Resistance Levels
– **Immediate Resistance:** 1.3400. A clear break above this level would mark the highest since mid-2023 and open the door to further gains.
– **Major Support Zones:** 1.3200 and 1.3100 represent strong floors, with buying interest likely to arise if the pair retraces.
– **Medium-Term Targets:** Should the 1.34 breakout succeed, the next resistance areas are at 1.3500 and 1.3650.
### Chart Patterns and Indicators
– **Moving Averages:** The pair trades comfortably above its 50-day and 100-day simple moving averages, pointing to sustained upside momentum.
– **Relative Strength Index (RSI):** RSI is not yet in overbought territory, suggesting there is room for further appreciation before any corrective pullback.
– **Volume Profiles:** Rising volumes on upswings indicate solid conviction behind the recent move.
### Bullish Catalysts
– Technical traders may see a confirmed daily close above 1.3400 as a green light for further gains, initiating a new bullish leg that could carry the pair to 1.36 and beyond.
## Fundamental Outlook: Why the Pound is Gaining Ground
### A. US Dollar Tailwinds Fading
– **Fed Policy Reassessment:** Market participants are re-pricing risk as it becomes clearer that the Fed’s room to raise rates further is constrained. Previous strength in the Dollar was heavily tied to aggressive rate hike bets, but as the economic data softens, the
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