GBP/USD Outlook – A Shift Toward BoE‑Friendly Sentiment Amid Fed Speculation

The British Pound has continued its slide against the U.S. Dollar, closing the day at 1.33224 on the IDEAL PRO platform. After a 52‑week low of 1.21013 in January, the currency is now trading well below the 52‑week high of 1.37887, signalling a persistent bearish trend that has been reinforced by recent macro‑economic data and market sentiment.

Recent Price Action

The pair fell to 1.3250 during the Asian session on Wednesday, the second consecutive day of decline. This erosion of value was anchored by the British Retail Consortium’s latest retail inflation data, which confirmed a contraction in shop‑price inflation. The easing of inflationary pressures has emboldened traders to reassess the likelihood of further Bank of England (BoE) rate cuts, further weakening the Pound.

BoE Rate‑Cut Narrative

The BoE has been perceived as moving toward a more dovish stance. Market expectations now lean heavily toward additional rate cuts, a view that has been bolstered by the Bank’s own signals and the recent retail inflation figures. The market’s consensus appears to anticipate at least one more cut in the coming cycle, a sentiment that has already priced in the possibility of a more aggressive easing agenda than previously expected.

Fed Policy and Global Dollar Dynamics

Across the Atlantic, the Federal Reserve remains the focal point for currency traders. The U.S. Dollar is trading with modest losses, maintaining a gradual decline throughout the week as markets await the Fed’s Wednesday announcement. The Fed’s policy meeting has seen a 25‑basis‑point rate cut fully priced in, reflecting expectations that the central bank will continue to ease rates in response to softer global economic data.

The divergence between the Fed’s expected policy path and the BoE’s dovish trajectory is a key driver of the current GBP/USD bias. While the dollar remains under pressure, it is also buoyed by positive market sentiment around potential U.S.‑China trade talks slated for Thursday, which could inject further demand for the USD in the short term.

Technical Context

At present, GBP/USD sits near a critical psychological level of 1.33. A break below this threshold would likely reinforce the current trend and trigger further selling pressure, whereas a rebound above could signal a temporary reversal. The 52‑week low provides a clear support point; a breach below 1.21013 would suggest a significant shift toward a new downside bias.

Forward‑Looking Outlook

Given the confluence of easing retail inflation, growing expectations for BoE rate cuts, and a dovish Fed outlook, the pound is positioned for continued weakness in the near term. However, the U.S. Dollar’s resilience on the back of trade optimism and the potential for further policy easing means that the exchange rate could experience volatility as the market digests these divergent signals.

Traders should monitor upcoming BoE commentary and the Fed’s policy announcement for any change in risk appetite, as both central banks’ decisions will be pivotal in determining the short‑term direction of GBP/USD. The market’s current equilibrium favours the dollar, but any significant policy shift or unexpected macro‑data release could quickly alter the trajectory of this major currency pair.