GBP/USD rises ahead of Fed and BoE decisions: market forecast and levels

This scenario is largely priced in, and market focus will shift to the comments of Fed Chair Jerome Powell, who may signal a continuation of the dovish policy cycle. Expectations for further easing were reinforced by Friday’s updated inflation forecasts from the University of Michigan, showing a downward revision in one-year inflation expectations from 4.5% to 4.1% and five-year expectations from 3.4% to 3.2%. Traders also noted changes in the personal consumption expenditure (PCE) inflation data: core PCE slowed from 2.9% to 2.8% year-over-year in September, while the monthly value remained unchanged at 0.2%.

Meanwhile, markets are preparing for a potential rate cut by the Bank of England at its December 18 meeting. Unlike the US, the UK is still facing above-target inflation, but the regulator may no longer postpone easing as the economy shows signs of weakening and the labor market cools rapidly.

At the same time, sterling is receiving marginal support from the newly approved UK budget, which includes significant tax increases. The plan extends the current lower tax threshold for another three years starting in 2028, pushing more citizens into higher tax brackets. The government also increased tax rates on real estate, dividends and savings income by 2.0%, while introducing a new tax for electric vehicle owners. These changes could add GBP 26 billion annually to the budget, covering the estimated deficit of around GBP 22 billion.

Investors are also watching November retail data from the British Retail Consortium (BRC), which fell from 1.5% to 1.2%, while analysts expected 2.4%.

Support and Resistance Levels

Bollinger Bands on the daily chart continue to move higher, with the upper boundary tightening slightly while maintaining room for price fluctuations. MACD is rising and suggests a steady buy signal, with the histogram above the signal line. Stochastic remains near the 80 mark, reflecting sideways movement in recent sessions, indicating the need for confirmation before opening new trades.

Resistance levels: 1.3346, 1.3384, 1.3435, 1.3500.

Support levels: 1.3305, 1.3268, 1.3215, 1.3179.

GBP/USD Trading Scenarios and Forecast

Long positions can be considered after a firm breakout above 1.3346 with a target at 1.3435. Stop-loss should be placed at 1.3305. Expected duration: 1–2 days.

If the price rebounds from 1.3346 and later breaks below 1.3305, it may be a signal for new short positions with a target at 1.3215. Stop-loss — 1.3346.