**GBP/USD Price Forecast: Sterling Holds 1.3475 as BoE Faces Inflation Test**
*By TradingNews.com Staff, referencing analysis originally published by TradingNews.com*
**Overview**
The British pound (GBP) has exhibited notable resilience against the US dollar (USD) in recent trading sessions, holding near the critical 1.3475 handle. As the Bank of England (BoE) confronts its most significant inflation test in years, the GBP/USD currency pair sits at a crucial juncture, with traders and investors closely monitoring developments from both central banks. The near-term and medium-term outlooks hinge on inflation data, monetary policy adjustments, and shifting risk appetites across global markets.
This article offers an in-depth analysis of the current GBP/USD dynamics, outlines key technical and fundamental factors, and explores possible scenarios for sterling as the BoE navigates the evolving inflation landscape.
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**Current Market Landscape**
The GBP/USD pair has experienced heightened volatility over recent weeks, driven by:
– Rising UK inflation well above the BoE’s 2 percent target
– Shifting expectations around BoE interest rate hikes
– Evolving expectations for US Federal Reserve tightening
– Global risk sentiment influenced by geopolitical and economic developments, including energy prices and supply chain disruptions
Sterling recently found stability above the 1.3475 level, a price area that has emerged as a critical zone of support for bulls, while the US dollar’s rally paused amid shifting expectations on Fed policy normalization.
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**BoE’s Inflation Challenge**
The BoE faces its sternest inflation test since the financial crisis, with consumer price growth hitting multi-decade highs. Recent data have shown:
– UK annual inflation exceeding 9 percent, the fastest pace in over 40 years
– Upward pressure from soaring energy and food costs
– Housing costs and import-driven price rises as significant factors
The BoE’s primary mandate is to maintain price stability, but with inflation running hot and signs of slowing growth, policymakers face a dilemma:
– Hiking rates aggressively could trigger a sharper economic downturn
– Maintaining a cautious approach risks letting inflation expectations become entrenched
The central bank has hiked rates at previous meetings and signaled further action may be needed. Market participants remain divided over the scale and speed of tightening, while also grappling with concerns about potential recession risks.
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**Technical Analysis: GBP/USD Key Levels and Patterns**
A technical assessment helps illuminate the near-term trajectory for sterling:
*Support Levels:*
– **1.3475**: Key support, previously resistance, now acting as a battleground for bulls and bears
– 1.3400-1.3420: Secondary support zone if the key level fails
– 1.3300: June swing low offers additional cushion on deeper corrections
*Resistance Levels:*
– 1.3550-1.3575: Immediate resistance ahead of recent swing highs
– 1.3620: Medium-term resistance, coinciding with the 200-day moving average
– 1.3700: Major psychological level, last tested during sterling rallies in early 2022
*Indicators and Chart Patterns:*
– The 20- and 50-day moving averages have been providing support for short-term uptrend momentum.
– The Relative Strength Index (RSI) hovers near the midpoint, suggesting neither overbought nor oversold conditions, but momentum could tilt on any catalyst.
– A consolidation wedge may be forming, with breakout potential higher if sterling holds above the 1.3475 level.
*Technical Scenarios:*
– Sustained closes above 1.3475 open the door for a move towards 1.3550 and potentially 1.3620.
– Failure to defend 1.3475 risks a retest of 1.3400 and a possible slide to 1.3300 if sentiment turns decisively bearish.
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**Fundamental Drivers: UK Rates, US Dollar
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