The GBP/USD pair maintains its upward trend, currently trading near 1.3240, following its seventh consecutive daily increase. The recent development indicates a blend of dollar weakness, a favorable fiscal environment in the UK, and evolving monetary outlooks across both sides of the Atlantic. Market participants are adjusting their portfolios in anticipation of the significant central bank meetings in December, as the pair approaches its immediate resistance area at 1.3265–1.3300, a range not observed since mid-September. The U.S. Dollar continues to face significant pressure, with the Dollar Index currently around 99.66, reflecting a decline of nearly 3.8% month-to-date, as market participants anticipate a substantial shift in Federal Reserve policy. Reports indicates an 87% likelihood of a 25-basis-point rate cut in December, a significant increase from 31% just a week ago. Market sentiment further intensified following reports that Kevin Hassett, recognized for his dovish stance, might succeed Jerome Powell as Fed Chair. Treasury yields responded as expected — the 10-year yield fell below 3.82%, while the 2-year decreased to approximately 3.59%, reaching its lowest level since June. The transition has intensified capital outflows from dollar-denominated assets and enhanced the appeal of higher-beta currencies such as sterling.
Sterling’s strength is attributed to the UK Autumn Budget, which provided a £22 billion fiscal cushion and enhanced short-term financial perspectives. Chancellor Rachel Reeves highlighted the importance of growth-oriented expenditure while maintaining stability in gilt markets, leading to a decrease of 14 basis points in the 10-year gilt yield, now at 3.77%. Even with GDP growth projections revised down to 0.8% for 2026, investors responded positively to the fiscal restraint that contributed to stabilizing the pound following a period of volatility. The interplay of decreased borrowing expenses and diminished political uncertainty has led to a resurgence of institutional investments in UK assets. The credibility of the budget is more significant than its magnitude — market participants view the resurgence of macro stability as a signal to increase their positions in sterling longs. The current rate expectations are establishing a multifaceted situation for GBP/USD. The likelihood of the Bank of England implementing its initial rate cut in Q1 2026 stands at 70%, although this is significantly influenced by a more pronounced easing cycle anticipated from the Fed. Governor Andrew Bailey’s remarks that “disinflation remains consistent with forecasts” suggest a potential for flexibility; however, with UK inflation at 3.8% YoY, policy remains firmly anchored. Conversely, U.S. core PCE decreased to 2.4%, indicating a quicker trajectory towards the target. The outcome: an expanding relative yield advantage for the pound, which now leads speculative positioning for the first time since August.
The GBP/USD chart indicates a persistent bullish dominance. The pair continues to trade above its 50-day EMA (1.3147) and 200-day EMA (1.3191) — a notable technical alignment suggesting underlying strength. A short-term pinbar reversal candle from Wednesday near 1.3210 confirmed buyer defense at the 200-MA, while momentum oscillators remain supportive with RSI at 63, well away from overbought extremes. Resistance is observed at 1.3264, succeeded by 1.3300, with the possibility of a breakout extending toward 1.3325–1.3360. On the downside, initial support is positioned at 1.3180, succeeded by 1.3103, where aggressive dip-buying is anticipated. Daily trading volumes are subdued as a result of U.S. holidays; however, the order flow continues to favor the accumulation of sterling. Macro divergences bolster the medium-term position of sterling. The U.S. Chicago PMI decreased to 44.6, indicating its lowest level since February, while durable goods orders declined by 5.3%, showcasing a widespread slowdown in the manufacturing sector. On the other hand, the UK’s retail volume index, while negative at –0.7% MoM, was not as severe as expected, offering a degree of relative stability. The deceleration in wage growth, indicated by average earnings excluding bonuses increasing by 5.1% year-over-year — the slowest rate since 2022 — alleviates pressure on the Bank of England while maintaining real income growth. The data presented collectively diminish the necessity for assertive tightening, enabling sterling to stabilize while maintaining its credibility.
Data from the CFTC indicates that speculative long exposure to GBP futures has risen by 17% week-on-week, whereas short exposure to USD has surged by 22%, marking the most significant increase since May. Market participants anticipate a short-term consolidation phase within the range of 1.3220 to 1.3270, while maintaining a bullish breakout outlook. Should the Fed affirm easing on December 18, algorithmic models project that GBP/USD may attain levels between 1.3380 and 1.3440 by the beginning of Q1 2026. Nonetheless, liquidity traps could still be a concern if U.S. macroeconomic data exceeds expectations, especially with the ISM Manufacturing Index and Non-Farm Payrolls scheduled for release next week. The interplay between various asset classes provides additional insight. Sterling strength has influenced EUR/GBP, which fell to 0.8542, marking its lowest point in three months. Meanwhile, the FTSE 100 increased by 0.7%, buoyed by banking and energy stocks that are capitalizing on a weaker pound. Gold’s ascent toward $4,200/oz indicates a significant devaluation of the dollar and suggests that a shift in capital is occurring among risk assets. At the same time, the sentiment surrounding cryptocurrency continues to be muted, leading to increased capital movement towards conventional foreign exchange safe havens. The GBP/USD (Cable) market concludes the week exhibiting robust technical momentum, underpinned by a favorable fiscal environment and an evolving monetary framework that benefits sterling. The interplay of a weakened dollar, a credible UK budget, and a moderately dovish stance from the BoE forms a bullish trifecta. The near-term setup indicates potential for continuation toward 1.3400, with upside targets set at 1.3300–1.3350, contingent on support remaining above 1.3200.