GBP/USD Price Forecast: Sees more downside below 1.3430 amid dovish BoE bets
- GBP/USD ticks lower to near 1.3480 amid weakness in the Pound Sterling.
- The British currency has been battered by strengthening dovish BoE prospects.
- BoE’s Taylor sees two or three interest rate cuts before returning to the neutral level.
The GBP/USD pair edges lower to near 1.3480 during the European trading session. The pair is under pressure as the Pound Sterling (GBP) trades broadly uncertain amid firming speculation that the Bank of England (BoE) could deliver a number of interest rate cuts in the near term.
BoE dovish expectations have been prompted after comments from Monetary Policy Committee (MPC) member Alan Taylor in a fireside chat on Monday in which he warned of downside labor market risks, expressed confidence in inflation normalization, and anticipated two or three interest rate cuts before reaching neutrality, a level where interest rates neither support nor restrict economic growth.
“Risks are shifting to lower inflation and higher unemployment, Taylor said, and added, “We [the BoE] might have two to three rate cuts to go before theoretical neutral level.”
Latest United Kingdom (UK) employment and Consumer Price Index (CPI) data also showed a higher jobless rate and moderate inflation growth.
Meanwhile, the US Dollar (USD) trades broadly firm despite United States (US) President Donald Trump delivering fresh tariff threats.
On Monday, Trump threatened steeper levies on countries that intend to dishonour trade deals while exploring benefits from the Supreme Court’s (SC) blocked tariff policy.
GBP/USD technical analysis
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GBP/USD trades marginally lower at around 1.3470. The 14-day Relative Strength Index (RSI) hovers near 40.00. A close below the same could trigger a fresh downside momentum.
The 20-day Exponential Moving Average (EMA) slopes lower and sits overhead at 1.3561, capping rebounds and preserving a soft short-term tone. The scenario in which the price closes below the February 19 low of 1.3434 would make it vulnerable to the January 19 low of 1.3344.
A recovery only gains traction on a sustained break back above the 20-day EMA; absent that, rallies risk fading, and the downswing could extend.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.