GBP/USD Forecast: Pound Holds Near 1.3249 Ahead of Fed Minutes

At the same time, sterling continues to show resilience against most other major currencies, supported by positive domestic fundamentals and the Bank of England’s stable monetary policy stance. Although discussion of tighter credit conditions continues each month, the overall tone among policymakers remains cautious, and Bank Rate has been kept at 3.75%, a level that has so far balanced inflation risks against the need to avoid excessive pressure on economic growth.

Nevertheless, Bank of England policymaker Catherine Mann, who is known for her hawkish views, said recently that inflation above the 2.0% target appears to have become embedded in the British economy. She also warned that consumer inflation could move close to 4.0% around the turn of the year, which increases the risk of stronger second-round effects. The next Bank of England meeting is scheduled for November 5, and market pricing now points to a high probability of a 25-basis-point increase to 4.00%. In the longer term, analysts still expect additional tightening if inflation remains persistent.

The US dollar, meanwhile, remains relatively soft, with the USD Index hovering just below the 102.00 mark. Investors are monitoring the bond market after the recent rise in Treasury yields increased pressure on supporters of the Federal Reserve’s hawkish course. Later today, markets will focus on the publication of the minutes from the September Federal Reserve meeting, at which the interest rate was raised by 25 basis points.

It is worth noting that policymakers’ rhetoric has become somewhat less aggressive in recent days. Cleveland Fed President Beth Hammack said there was still time to assess incoming data before making further policy decisions, while Kansas City Fed President Jeff Schmid maintained that the fight against inflation should continue despite higher bond yields. According to the CME FedWatch Tool, the probability of another rate hike in October is currently only around 21.6%.

As discussed in our previous GBP/USD forecast, sterling remains relatively well supported by domestic economic data and expectations that the Bank of England may still need to tighten policy further if inflation proves persistent.

Support and resistance levels

On the daily chart, the trading instrument is holding above the support line of a global sideways channel with fixed boundaries of 1.3640–1.3160.

Technical indicators are strengthening the sell signal: the fast EMAs of the Alligator indicator remain significantly below the slow ones, while the AO histogram is forming corrective bars in negative territory.

Support levels: 1.3210, 1.3070.

Resistance levels: 1.3280, 1.3400.

GBP/USD trading scenarios and exchange rate forecast

Short positions may be opened after the price declines and consolidates below 1.3210, with a target at 1.3070. Stop-loss — 1.3300. Estimated implementation period: 7 days or more.

Long positions may be opened after the price rises and consolidates above 1.3280, with a target at 1.3400. Stop-loss — 1.3200.