GBP – Sterling traded in a narrow range, awaiting central bank meetings this week

The pound traded in a narrow range against the dollar on Monday, after climbing to a six-week high last week, supported by a better-than-expected response to Chancellor Rachel Reeves' budget and market expectations that the dollar would remain under pressure if the Federal Reserve signals further rate cuts after a December rate cut. UK October economic growth data will be released on Friday. A Reuters poll of economists predicts that the UK economy grew by 1.4% year-on-year in October, compared to 0.1% growth in September. In addition, Bank of England Governor Andrew Bailey will speak on Wednesday. Currently, currency markets indicate that traders see an approximately 87% probability of a 25 basis point rate cut to 3.75% at the Bank of England's December 18 meeting. The outlook is less clear. The market expects one more rate cut in the first half of 2026, after which the Bank of England will remain on hold like most other major central banks.

From a technical perspective, the GBP/USD pair traded largely between 1.30 and 1.32 in November, and has now broken out of that range, potentially continuing its upward trend with a double bottom formation. Using the Fibonacci retracement level, the 50% retracement level is at 1.3380, which also coincides with the 100-day moving average; a further extension to the 61.8% retracement level is at 1.3465. Significant resistance is seen at the 1.35 level, followed by the September 17 high of 1.3726. Support levels are seen at the 50-day moving average at 1.3260 and 1.32, then 1.3090. The psychological level of 1.30 is considered crucial, as it was narrowly held at the beginning of last month.

Forecast range:
Resistance: 1.3380 – 1.3471 - 1.3500 – 1.3726
Support: 1.3260 - 1.3200 - 1.3090 - 1.3000*

Key Focus:
Thursday: UK November RICS House Price Balance (08:01)

Friday: UK October GDP, Industrial Production, Goods Trade Balance (15:00)
France November HICP Final Reading (15:45)

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