GBP/USD. Analysis and Forecast

[Ben Graham]

For the second consecutive day, the GBP/USD pair has remained in a sideways consolidation, fluctuating in a range above the 200-day SMA and the 20-day SMA, just above the psychological 1.3400 level. A mixed fundamental backdrop encourages caution when opening directional positions, as market participants are awaiting key U.S. macroeconomic releases. Today, the U.S. Personal Consumption Expenditures (PCE) index will be published, along with the final estimate of Q3 GDP growth, which should shed light on the outlook for the Federal Reserve's policy. These indicators are expected to have a significant impact on short-term U.S. dollar dynamics and set the direction for GBP/USD.Meanwhile, the U.S. dollar has remained positive following yesterday's rise amid easing tensions surrounding Greenland. Moreover, on Wednesday at the Davos forum, U.S. President Donald Trump abandoned threats to impose tariffs on goods from several European countries, announcing a framework agreement with NATO on Greenland going forward. These statements eased fears of a new trade war that had previously fueled the "Sell America" campaign. In addition, a reassessment of expectations regarding aggressive monetary easing by the Fed is lending support to the U.S. dollar and limiting the upward potential of GBP/USD.

At the same time, the British pound is struggling to find sustained buying interest amid mixed forecasts regarding interest rate cuts by the Bank of England. The UK Office for National Statistics reported yesterday that headline consumer price inflation (CPI) rose for the first time in five months, reaching 3.4% year-on-year in December. This reduces the likelihood of a cut in borrowing costs at the Bank of England's upcoming monetary policy meeting early next month. Nevertheless, markets are pricing in one or two 25-basis-point rate cuts in 2026, which restrains aggressive buying of GBP/USD and keeps price action confined to a narrow range.

From a technical perspective, spot bulls are currently relying on the critical 200-day simple moving average (SMA), located just above the 1.3400 psychological level, which serves as a key support point. If bulls fail to hold this level, the pair could accelerate lower toward the 100-day SMA, at which point bulls may lose control.

On the other hand, if bulls manage to break above the 20-day SMA, they will encounter resistance around 1.3490 ahead of the psychological 1.3500 level. Oscillators on the daily chart are close to neutral, indicating that the pair is at a crossroads. The table below shows the percentage change of the U.S. dollar against major currencies for the current day. The dollar has shown the greatest strength against the euro.

The material has been provided by InstaForex Company - www.instaforex.com