**GBP/USD Price Forecast: Sterling Holds 1.35 as Fed Pivot Offers Breathing Room Amid UK Fiscal Strain**
*By John Smith, TradingNews.com
Source: https://www.tradingnews.com/news/gbp-usd-price-forecast-sterling-holds-1-35-as-fed-pivot-offers-uk-fiscal-strain*
The British pound (GBP) has managed to hold its ground around the crucial 1.35 level against the US dollar (USD). The resilience of sterling comes amid a notable shift in expectations surrounding the Federal Reserve’s monetary policy stance and ongoing fiscal challenges in the United Kingdom. This article provides a comprehensive analysis of the recent GBP/USD price action, the market drivers at play, and the outlook for traders going forward.
## Recent Price Action: Sterling Finds Support
The GBP/USD pair has demonstrated relative steadiness in the face of global uncertainty and domestic headwinds. Over the past few weeks, sterling has oscillated between 1.3450 and 1.3550, with 1.35 emerging as strong psychological and technical support.
– **Support and Resistance Highlights:**
– Key support seen consistently around 1.3450-1.3500
– Upside resistance persists at 1.3600 and 1.3700
– Moving averages (20-, 50-, and 100-day) clustering near current prices, reflecting consolidation
Despite volatility and the looming specter of further UK economic weakness, pound bears have struggled to break this level. Buyers, on the other hand, have leveraged dovish expectations on the US side to maintain upward momentum.
## Fed Pivot: Shifting Market Expectations
A crucial factor underpinning cable’s resilience is the growing belief that the Federal Reserve may be approaching the end of its aggressive tightening cycle. This potential Fed pivot has weighed on the greenback, reducing upward pressure on the USD and giving GBP some breathing room.
– **Recent Fed Developments:**
– Signs of moderating inflation in recent US data
– Fed officials hinting at a pause or slowdown in rate hikes
– Futures markets repricing to reflect less hawkish expectations
The US dollar index (DXY) has weakened from its recent highs above 105, falling back to the mid-102-103 range. With core inflation showing the first signs of retreat and Fed rhetoric softening, dollar demand has tapered. This indirectly supports GBP/USD, especially as UK economic news has at times been overshadowed by US dollar dynamics.
## UK Fiscal Strain: A Persistent Headwind
While the dovish Fed tilt offers relief, substantial fiscal and economic challenges remain in the United Kingdom. The government continues to grapple with elevated public borrowing, uncertainty over future spending, and persistent cost-of-living pressures on households.
– **Fiscal Concerns in the UK:**
– Budget deficit remains high post-pandemic and post-Brexit
– Public debt at historically elevated levels
– Rising interest costs threaten fiscal sustainability
– Government faces difficult decisions on spending cuts or tax hikes
These concerns could cap sterling advances by undermining investor confidence in the longer-term UK economic outlook. Furthermore, rating agencies have issued warnings about the sustainability of UK public finance, cautioning that further shocks could materially worsen the fiscal position.
## Economic Data: Mixed Signals for Sterling
Macroeconomic data from both the UK and US continues to provide a mixed backdrop for sterling traders.
### UK Economic Highlights
Recent releases have painted a complicated picture for the British economy:
– GDP growth for the last quarter was marginal, below expectations
– Inflationary pressures remain persistent, particularly in energy and food prices
– The labor market remains resilient, but real wage growth has not kept pace with inflation
– Business and consumer confidence remain subdued
While the Bank of England (BoE) has attempted to navigate between supporting growth and curbing inflation, its policy stance remains challenging. The BoE’s
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