Pound-to-Dollar Rate Forecast: GBP/USD Pound Tests 1.3400 Ahead of UK Inflation and BoE Decision

Investors and forex traders are refraining from opening new positions, preferring to wait for the release of key UK inflation data for November, scheduled for today at 09:00 (GMT+2). Forecasts suggest that annual consumer price inflation will slow from 3.6% to 3.5%, while the monthly reading is expected to ease from 0.4% to 0.0%. Core CPI on an annual basis is likely to hold at 3.4%. Producer price inflation, meanwhile, may rise by 0.2% after a –0.3% reading in the previous month. These figures will be released ahead of the Bank of England meeting, the outcome of which will be announced tomorrow at 14:00 (GMT+2). Analysts largely expect the policy rate to be cut by 25 basis points to 3.75%. Earlier, officials acknowledged that inflation in the UK remains elevated, but noted that there is little time left to bring price growth back to target levels. The domestic economy is showing zero growth and could slip back into stagnation at any moment, with analyst forecasts remaining rather pessimistic. Against this backdrop, the government has approved a budget that предусматривает fairly aggressive tax hikes alongside cuts in social spending.

Some support for the pound comes from business activity data released the previous day. The S&P Global manufacturing PMI rose from 50.2 to 51.2 in December, while the services PMI increased from 51.3 to 52.1, beating expectations of 51.5. At the same time, October labour market data showed unemployment rising from 5.0% to 5.1%, the highest level since early 2021. Employment declined for a second consecutive month, falling by another 16,000 jobs. Wage growth including bonuses said slowed from 4.9% to 4.7% versus a forecast of 4.4%, while excluding bonuses it eased from 4.7% to 4.6% against expectations of 4.5%. Analysts note that the sector has been under pressure from tax policy, as businesses have been reluctant to hire amid uncertainty over potential tax changes in the new budget.

Meanwhile, US data showed a decline in S&P Global business activity indices in December. The manufacturing PMI slipped from 52.2 to 51.8 against a forecast of 52.0, while the services PMI fell from 54.1 to 52.9. The main negative factor for the dollar was a mixed US labour market report for November: despite a 64,000 increase in nonfarm payrolls, the unemployment rate rose from 4.4% to 4.6%.

Support and resistance levels

Bollinger Bands on the daily chart are showing steady upward movement, with the price range expanding to the upside and clearing room for bulls to push toward new local highs. The MACD is rising, maintaining a relatively weak buy signal, as the histogram remains above the signal line. The Stochastic oscillator tends to move sideways despite the fairly strong advance in the pound on Tuesday. Additional confirmation from the indicator is required.

Resistance levels: 1.3437, 1.3455, 1.3500, 1.3550.

Support levels: 1.3391, 1.3346, 1.3305, 1.3268.

Trading scenarios and GBP/USD outlook

Short positions may be opened after a clear break below the 1.3391 level, with a target at 1.3305. Stop-loss: 1.3437. Expected holding period: 2–3 days.

A rebound from the 1.3391 support level followed by a breakout above 1.3437 could serve as a signal to open new long positions with a target at 1.3550. Stop-loss: 1.3391.