GBP/USD Forecast: Pound Near 1.3340 Ahead of Fed Decision

Although sterling remains relatively resilient against other major currencies, persistently high oil prices are complicating the UK economic outlook, adding to inflationary pressure while weighing on spending. According to the Office for National Statistics (ONS) September retail sales report, sales volumes fell by 0.4% month on month, following an upwardly revised 0.7% increase in August. Supermarket and online clothing sales declined, with unusually warm weather weighing on demand for autumn and winter clothing. Over the third quarter, however, sales volumes increased by 0.7%. Retailers also continue to face pressure from operating costs and business rates, prompting calls for measures to ease the burden on the sector. The Bank of England's next policy decision is scheduled for November 5. Bank Rate currently stands at 3.75%, and the risk of more persistent energy-driven inflation leaves a potential increase to 4.00% in focus, although the outcome remains uncertain.

The US dollar is edging higher, with the US Dollar Index (USDX) near 101.80 in the source analysis. Investors continue to monitor tensions in the Persian Gulf, where the risk of further escalation is supporting demand for the currency as a safe-haven asset, a theme also covered in our previous forex market review. Further gains may be limited ahead of the Federal Reserve's policy decision on October 28, due at 20:00 (GMT+2). The federal funds target range stands at 3.75–4.00%, following September's quarter-point increase. The September FOMC minutes showed that most participants considered another increase likely to be appropriate before year-end, although subsequent decisions would depend on incoming data. A pause at the October meeting remains the baseline expectation, while the December 8–9 meeting will provide another opportunity for policymakers to assess whether further tightening is needed. An additional quarter-point increase would take the target range to 4.00–4.25%.

Support and Resistance Levels

On the daily chart, the pair remains above the support line of a broader sideways channel bounded by 1.3160 and 1.3660.

Technical indicators suggest that the weak buy signal is fading: the Alligator indicator's faster moving averages remain slightly above its slower lines, while the Awesome Oscillator (AO) histogram is forming corrective bars in positive territory.

Support levels: 1.3310, 1.3190.

Resistance levels: 1.3370, 1.3480.

Trading Scenarios and GBP/USD Forecast

Short positions may be considered after the price breaks and holds below 1.3310, targeting 1.3190. Stop Loss: 1.3400. Expected holding period: 7 days or longer.

Long positions may be considered after the price breaks and holds above 1.3370, targeting 1.3480. Stop Loss: 1.3300.