**GBP/USD Price Forecast: Sterling Holds 1.35 as Fed Pivot Offers Respite Amid UK Fiscal Strain**
*By John Morgan, TradingNews.com*
The British pound (GBP) continues to demonstrate resilience against the US dollar (USD), with the GBP/USD pair maintaining its footing above the psychologically significant 1.35 level. This performance comes amid shifting central bank rhetoric, evolving economic indicators, and renewed scrutiny of the UK’s fiscal outlook. Market participants now closely analyze a potential Federal Reserve (Fed) policy pivot and how it could shape near-term direction for sterling, especially given ongoing domestic pressures.
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## Key Market Developments
**1. Fed Keeps Options Open, Offering Sterling a Breather**
– The Federal Reserve’s latest communications have signaled openness to moderating its interest rate hikes, prompting a reassessment of the dollar’s recent dominance.
– Powell’s comments regarding the balance of risks helped drive a pullback in Treasury yields, thereby easing upward pressure on the USD.
– The result: GBP/USD stabilizes above 1.35, reflecting improved risk sentiment and some respite for battered currency pairs.
**2. UK Faces Domestic Fiscal Constraints**
– The UK government continues grappling with mounting fiscal pressures, including elevated public debt, cost-of-living crises, and increased energy spending.
– Markets still demand clarity on Chancellor’s fiscal roadmap following previous volatility caused by uncertain policy commitments.
– Rising gilt yields signal investor caution, with concerns that the government’s leeway on further stimulus may be limited.
**3. Inflation Remains a Double-edged Sword**
– Both the US and UK contend with stubbornly high inflation, though recent data hint at waning momentum.
– The Bank of England navigates a delicate path between supporting growth and tempering price pressures, all while recent GDP readings fuel speculation about the national recovery arc.
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## GBP/USD Price Action and Technical Landscape
GBP/USD has carved out a notable recovery from its late-2023 lows, extending a multi-week uptrend into Q2 2024. The pair’s ability to trade north of 1.35 is attracting both technical and macro-oriented traders.
### **Chart Structure and Key Levels**
– Support: The 1.3450 zone continues to attract dip-buyers, while 1.3350 marks a deeper support amid prior breakout structure.
– Resistance: The 1.3650 level presents the initial barrier, with further GBP upside capped near 1.3750 should momentum accelerate.
– Moving Averages: The 50-day and 100-day moving averages align beneath spot prices, underpinning the pair and confirming a bullish bias.
– Relative Strength Index (RSI): Momentum oscillators hover near the mid-60s, suggesting the rally is not yet overextended.
### **Interpreting Current Technicals**
The stronghold above 1.35 indicates market participants are willing to buy dips, anticipating that the major central banks’ tightening cycles might soon pause. Bullish momentum is validated by both price action and key technical indicators, underscoring the prospect of further appreciation should data remain supportive.
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## Macro Themes Driving Sentiment
**1. Federal Reserve’s Policy Pivot:**
– The Fed’s recent recalibration signals a more data-dependent and less aggressive rate-hiking trajectory.
– Markets now price in a higher probability of incremental increases or possible pauses, dimming the greenback’s relative yield advantage.
– This dovish tilt underpins risk currencies including GBP, allowing some recovery after a sustained barrage of USD strength.
**2. Divergent Growth and Inflation Dynamics:**
– The US economy shows relative robustness, but rising borrowing costs foster slowdown fears.
– UK GDP data underlines persistent weakness, with the post-Brexit adjustment, high energy prices, and public sector disruptions compounding challenges.
– If US growth cools faster than expected and UK data stabilizes, the exchange rate calculus could tilt favorably for sterling.
**3. Fiscal Prudence and
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