GBP/USD Price Forecast: Holds steady above 1.3400, retains constructive tone above key support

• GBP/USD flatlines around 1.3405 in Tuesday’s early European session.
• The constructive outlook of the pair remains intact above the 100-day SMA, with bullish RSI momentum.
• The first upside barrier emerges at 1.3465; the initial support level is seen at 1.3385.

The GBP/USD pair trades on a flat note near 1.3405 during the early European trading hours on Tuesday. Traders prefer to wait on the sidelines ahead of the key events later this week, including the US midterm elections, the Bank of England (BoE) interest rate decision and US September jobs data.

The BoE is expected to raise the Bank Rate to 4.0% from 3.75% at its November policy meeting on Thursday. This would be its first hike since August 2023, when inflation was still more than the BoE’s 2% target. ING analysts said that after Thursday’s expected rate hike, a follow-up hike from the BoE in February is also likely, but said that market pricing for BoE rate hikes “looks extreme.”

Traders will closely monitor the press conference for more clues about the UK interest rate outlook. If BoE Governor Andrew Bailey delivers hawkish remarks, this could boost the British Pound (GBP) against the US Dollar (USD) in the near term.

BoE seen kicking off tightening cycle but guidance may cap Pound gains

Strategists at Brown Brothers Harriman note that attention will focus on the Bank of England’s policy decision and Monetary Policy Report on Thursday, with the BoE “widely expected to start tightening with a 25bps hike to 4.00% after standing pat all year.” They point out that “firmer UK inflation and economic activity back the move,” while the vote split is anticipated at “7-2 with doves Alan Taylor and Swati Dhingra supporting a hold.”

BBH adds that “BoE guidance and the updated MPR will test market expectations for 100bps of tightening over the next twelve months,” warning that “persistent spare capacity across the forecast horizon would strengthen the case for pricing out hikes and limit GBP upside.”

Greene flags stalled wage disinflation, keeping BoE hawkish bias intact

BoE’s Greene scores 7.4/10 on FXS Speechtracker, exactly in line with the historic average, signaling a steady but firmly hawkish stance. Emphasis that wage disinflation has stalled at levels above those consistent with 2% inflation, alongside forward-looking pay growth near 3.5% and a surprisingly resilient economy, reinforces concern that second-round inflation effects remain a material risk.

Greene’s call to proactively lean against these second-round effects, and the view that such risks are now greater than previously thought, points to a reluctance to endorse rapid policy easing. The suggestion that labor market slack may have peaked supports the idea that underlying wage pressures could persist, a configuration that is typically supportive of the Pound as markets price a more persistent BoE tightening bias.

Technical Analysis: GBP/USD maintains a constructive tone above the 100-day SMA

In the daily chart, GBP/USD holds above both the 100-day Simple Moving Average (SMA) and the Bollinger Bands 20-period middle SMA, which together suggest a supported near-term tone after the recent recovery off the lower band. The Relative Strength Index (14) at 57.9 leans constructive without yet signaling overbought conditions, hinting that bullish momentum is still developing while price approaches the upper edge of the recent volatility envelope.

On the topside, initial resistance level emerges at the upper boundary of Bollinger band near 1.3465, en route to the July 15 high of 1.3558. Further north, the next hurdle to watch is the August 21 high of 1.3675.

On the downside, immediate support level is seen at the 100-day SMA at 1.3385, followed by the Bollinger middle band around 1.3320 and then the October 15 low of 1.3184. Any follow-through selling below this level could expose the recent Bollinger lower band low near 1.3172. 

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