GBP/USD Holds Below Pre-Fed Levels Even as BoE Keeps Bank Rate Steady

British Pound Outlook: GBP/USD

GBP/USD struggles to retrace the decline following the Federal Reserve interest rate decision even as the Bank of England (BoE) keeps the Bank Rate at 4.75%, and the exchange rate continue to give back the recovery from the November low (1.2487) should it track the negative slope in the 50-Day SMA (1.3019).

GBP/USD Holds Below Pre-Fed Levels Even as BoE Keeps Bank Rate Steady

GBP/USD remains vulnerable to a bear-flag formation as it continues to hold below the moving average, and it seems as though there’s a growing dissent with the Monetary Policy Committee (MPC) as ‘recent developments added to the argument for a gradual approach to the withdrawal of policy restrictiveness.’

Join David Song for the Weekly Fundamental Market Outlook webinar.

David provides a market overview and takes questions in real-time. Register Here

The minutes from the BoE’s meeting suggest the central bank will continue to unwind its restrictive policy in 2025 as ‘three members preferred a 0.25 percentage point reduction in Bank Rate at this meeting,’ and a growing number of MPC officials may prepare UK households and businesses for lower interest rates as ‘the most recent data developments pointed to sluggish demand and a weakening labour market.’

UK Economic Calendar

In turn, the British Pound may face headwinds ahead of the next BoE meeting on February 6, 2025, but the update to the UK Retail Sales report may prop up GBP/USD over the remainder of the week as household spending is expected to increase 0.5% in November after contracting 0.7% the month prior.

With that said, a positive development may spur a bullish reaction in the British Pound, but a weaker-than-expected UK Retail Sales report may push the exchange rate towards the November low (1.2487) as a bear-flag appears to be unfolding.

GBP/USD Price Chart –Daily

Chart Prepared by David Song, Strategist; GBP/USD on TradingView

Keep in mind, GBP/USD registered a fresh monthly low (1.2562) after failing to push back above the 1.2710 (23.6% Fibonacci extension) to 1.2760 (61.8% Fibonacci retracement) zone, and lack of momentum to hold above 1.2540 (78.6% Fibonacci retracement) may lead to a test of the November low (1.2487).
Next area of interest comes in around 1.2390 (38.2% Fibonacci extension) to 1.2446 (May low), but failure to break/close below 1.2540 (78.6% Fibonacci retracement) may keep GBP/USD within the November range.
Need a close above the 1.2710 (23.6% Fibonacci extension) to 1.2760 (61.8% Fibonacci retracement) zone to bring 1.2820 (38.2% Fibonacci extension) back on the radar, with the next region of interest coming in around 1.2900 (23.6% Fibonacci retracement) to 1.2910 (50% Fibonacci extension).

Additional Market Outlooks

US Dollar Forecast: AUD/USD Approaches November 2023 Low

USD/CAD Pullback Keeps RSI Below Overbought Territory

US Dollar Forecast: EUR/USD Attempts to Halt Five-Day Selloff

Gold Price Forecast: Bullion Remains Below Pre-US Election Prices

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

StoneX Financial Ltd (trading as "FOREX.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, FOREX.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date.

This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. No opinion given in this material constitutes a recommendation by FOREX.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although FOREX.com is not specifically prevented from dealing before providing this material, FOREX.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Financial Ltd. StoneX Financial Ltd is a company incorporated in England and Wales with UK Companies House number 05616586 and with its registered office at 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is authorised and regulated by the Financial Conduct Authority in the UK, with FCA Register Number: 446717.

FOREX.com is a trademark of StoneX Financial Ltd. This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy. FOREX.com products and services are not intended for Belgium residents.