GBP/USD Rises Ahead of Fed Decision as Traders Expect Rate Cut

Investors are focused on the upcoming U.S. Federal Reserve meeting, with results due Wednesday at 20:00 (GMT+2). According to the CME Group’s FedWatch Tool, there is nearly a 90% probability of a 25-basis-point rate cut. Over the past few days, analysts have also grown confident that the Fed could opt for a more aggressive easing cycle, likely in December. Supporting this view, Friday’s inflation data showed the annual CPI accelerating from 2.9% to 3.0% (vs. 3.1% expected), while core inflation slowed slightly from 3.1% to 3.0%. Price pressure risks have long been one of the main obstacles for Fed Chair Jerome Powell in moving toward lower borrowing costs, prompting a cautious stance despite political pressure from the White House. Meanwhile, the ongoing U.S. government shutdown has halted the release of labor market data.

At the same time, the pound received modest support from last week’s U.K. retail sales report, which showed annual growth accelerating from 0.7% to 1.5% in September, beating forecasts of 0.6%. On a monthly basis, sales eased slightly from 0.6% to 0.5%, still outperforming expectations of a 0.2% decline.

Support and Resistance Levels

Bollinger Bands on the daily chart show a flat trend: the price range remains wide enough for the current market activity. MACD is rising, generating a new buy signal as the histogram moves above the signal line. The Stochastic oscillator is also trending bullish, holding near the mid-zone of its range.

Resistance levels: 1.3413, 1.3450, 1.3500, 1.3554.

Support levels: 1.3350, 1.3300, 1.3250, 1.3200.

Trading Scenarios for GBP/USD

Long positions may be opened after a confident breakout above 1.3413, targeting 1.3500. Stop-loss: 1.3370. Expected duration: 2–3 days.

If the bearish momentum returns and the price breaks below 1.3300, new short positions could be considered with a target at 1.3200. Stop-loss: 1.3350.