GBP/USD Price Forecast: Holds firm near 1.3410 at monthly high

• Near its monthly high of around 1.3410, GBP/USD remains well supported.
• Expectations of a hawkish BoE stance have lent support to the British Pound.
• UK Retail Sales and flash UK-US PMI figures are next in focus for investors.

September’s strong United Kingdom (UK) Consumer Price Index (CPI) figures have reinforced expectations of a hawkish Bank of England (BoE), lifting GBP/USD. During Thursday’s European trading, the British Pound (GBP) remains firm against the US Dollar (USD), close to its monthly high at around 1.3410.

UK inflation overshoot reinforces focus on BoE tightening

Renewed upward pressure was evident in the latest UK inflation figures, according to analysts at Nomura, who describe “both headline and services inflation” in September as “above consensus expectations.” Underlying price pressures remain persistent on the BoE’s core gauge, the analysts add, noting that “the BoE’s core measure service prices momentum has been sticky over the past few months.”

Price pressures further up the supply chain are also a concern for Nomura, which notes that “upstream prices also surprised on the upside.” The analysts attribute wholesale goods price increases mainly to energy, describing them as “dominated by a rise in energy costs,” while noting that “core prices rose at a more modest pace.” They also caution that “upstream service prices are signalling a further increase in consumer prices,” highlighting the risk that households will face renewed cost pass-through.

Explaining its revised BoE outlook, Nomura says that “a combination of sticky inflation, a resilient labour market, strong economic growth and persistently elevated energy prices has led us to change our view on the BoE.” Further policy tightening is now the bank’s expectation: “We now see rate hikes in November and February, which is still a more dovish outcome than markets are pricing.”

Friday’s releases will bring September’s UK Retail Sales figures into focus, alongside the preliminary UK-United States (US) S&P Global PMI readings for October.

GBP/USD Regains a Bullish Bias Below Key Resistance

At 1.3404 on the daily chart, GBP/USD has recovered a near-term bullish bias. The pair remains above its 20-day Exponential Moving Average (EMA) at 1.3313, trading between the 38.2% and 50.0% Fibonacci retracements of the recent decline. The latter, at 1.3409, lies just above the current price. As this key retracement resistance is tested, the Relative Strength Index (RSI) is edging into positive territory at 58.6, suggesting that upward momentum is recovering.

The first upside barrier is the 50.0% Fibonacci retracement at 1.3409. Beyond it lie the 61.8% level near 1.3472 and the 78.6% retracement around 1.3562, before the more distant recent swing high at 1.3677. Support initially comes from the 38.2% Fibonacci retracement at 1.3345, followed by the 23.6% level around 1.3267. A more pronounced decline would bring the structural floor near 1.3140 into view.

(The technical analysis of this story was written with the help of an AI tool. Know more.)