Below 1.3350: GBP/USD Price Forecast retains bearish bias under 100-day SMA as pair weakens

• 1.3320 is in focus as GBP/USD slips in early European trading on Thursday.
• Below the 100-day SMA, the pair retains a bearish bias, although neutral RSI momentum leaves scope for further consolidation.
• At 1.3290 lies the first downside target, while 1.3385 marks immediate resistance.

GBP/USD is lower at around 1.3320. Early European trading on Thursday sees the British Pound (GBP) lose ground against the US Dollar (USD) after the UK Budget. Attention later on Thursday turns to the US September Personal Consumption Expenditures (PCE) inflation report.

A target date for defence spending to reach 3% of Gross Domestic Product (GDP) has been outlined by the United Kingdom (UK). Finance Minister John Healey also announced billions in aid for Ukraine in a “clear message to Moscow.” On Wednesday, Healey identified 2030 as the target for the 3% figure and reiterated the UK's NATO commitment to reach 3.5% by 2035.

At its October policy meeting on Wednesday, the Federal Open Market Committee (FOMC) kept the benchmark federal funds rate at 3.75% to 4% following a 10-2 vote. Incoming data would hopefully guide the next decision, Federal Reserve (Fed) officials said.

UK budget: Fiscal tightening and gilt supply in focus for GBP and gilts

For GBP and gilts, Brown Brothers Harriman strategists identify the UK budget as the key driver, arguing that "GBP and gilts will take their cue from today’s UK budget (12:30pm London, 8:30am New York)." They say markets are focused on "whether the government preserves the planned fiscal tightening and keeps gilt issuance in check." Citing the OBR's March projections, they point to the "cyclically adjusted primary balance, which excludes interest costs and adjusts for the economic cycle, to improve from a 0.3% of GDP deficit in 2026/27 to a 0.3% surplus in 2027/28, implying a fiscal drag of 0.6% of GDP." For supply, BBH flag that "analysts expect 2026/27 total gilt sales of £249.6bn, up £3.4bn from April’s plan, but £2.5bn below March’s original figure."

The strategists see support for gilts from continued restraint, saying "maintaining or increasing the fiscal squeeze should support gilts by easing inflation pressure and tempering BOE hike expectations." Sterling faces competing forces, however: they caution that "stronger fiscal credibility would compete with lower rate support and limit upside." The alternative carries risks, with BBH warning that "fiscal slippage and heavier gilt issuance can drive gilt yields up and GBP down."

2% inflation target: Warsh’s firm stance sustains Dollar bulls

A 7/10 FXS Speechtracker score places Warsh’s press conference firmly in hawkish territory. Matching the established baseline, it underlines an unchanged commitment to tackling inflation. His emphasis that “ensuring price stability is not about a fixed date on a calendar” and pledge of “no ifs and or buts, we will deliver price stability” point to a resolute, data-dependent approach to the 2% PCE target. That commitment is supported by “new monetary medicine” and the recent withdrawal of accommodation. Warsh repeatedly cited inflation expectations “going the right way,” wider credit spreads and the growing impact of rates on technology and CAPEX. These references suggest confidence that tighter policy is taking effect, without ruling out additional restraint if required.

After a +14.39-point jump, the FXS Fed Sentiment Index reached 141.89. That leaves it well above the neutral 100 threshold in firmly hawkish territory, consistent with the unchanged 7/10 FXS Speechtracker score. Together, the elevated index and steady tone suggest markets should keep pricing in a strong anti-inflation reaction function. This provides support for the Dollar against currencies whose central banks are seen as less determined to secure price stability.

Technical Outlook: 100-day SMA caps GBP/USD as bearish bias persists

On the daily chart, trading below the 100-day simple moving average (SMA) leaves GBP/USD with a mildly bearish short-term bias. Although spot sits above the 20-day Bollinger middle band, the upper band is close and the Relative Strength Index (RSI) is neutral near 49. This combination points to consolidation beneath broader overhead supply, rather than the start of a new bullish move.

The Bollinger middle band around 1.3290 provides immediate support. Below it, the 15 October low of 1.3184 comes into view, with the lower Bollinger band near 1.3165 offering the next support level. 

An advance would first encounter the 100-day SMA at 1.3385. Beyond that, the upper Bollinger band near 1.3420 could attract renewed selling. A decisive move through this level could open the way towards the 15 July high of 1.3558. 

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