GBP/USD picked up its upward momentum on Friday, making up for some of the losses from Thursday as the US dollar (USD) managed slight gains. US inflation figures suggest that the Federal Reserve (Fed) is likely to move forward with a rate cut in December, which is putting pressure on the dollar. As of now, the pair is at 1.3349, reflecting a 0.19% increase.
US core PCE supports December Fed rate cut, GBP/USD climbs
The Fed’s main inflation gauge, the core personal consumption expenditures (PCE) price index, which excludes food and energy, saw a 0.2% increase month over month in September, consistent with August and what was expected. Year-over-year, it dipped from 2.9% to 2.8%.
Meanwhile, the University of Michigan’s consumer sentiment index rose to 53.3 in December, surpassing the anticipated 52 and up from the final reading of 51 in November. Joan Hsu, director of consumer research, noted, “While there are signs of improvement from November, the overall picture still looks rather grim.”
Inflation expectations for the next year among Americans fell from 4.5% to 4.1% in December, while the five-year outlook decreased from 3.4% to 3.2%.
In light of this, 84% of those surveyed anticipate the Federal Reserve will cut interest rates by 25 basis points (bps) next week.
After the data came out, the GBP/USD pair fluctuated around 1.3340, with the dollar weakening based on the expectations of further easing, then it moved towards 1.3350.
Morgan Stanley weighed in on the matter, indicating that it expects rate cuts of 25 bps in December, January, and April 2026, projecting the federal funds rate to end between 3% and 3.25%.
As for business activity, there appears to be some recovery, and the British pound (GBP) seems to have eased worries over last month’s budget, according to S&P Global.
Nonetheless, the Bank of England is anticipated to reduce its interest rates by 25 bps to 3.75% in its upcoming December 18th meeting, after holding steady in November.
GBP/USD Price Forecast: Technical Insights
The GBP/USD has recently climbed above the 200-day simple moving average (SMA) of 1.3326 but appears to be restricted by the 100-day SMA at 1.3365. It seems reasonable to expect further monetary easing ahead, and with the next Fed meeting on the horizon, a breakout above the 100-day SMA seems plausible.
This means the next significant resistance level could be around 1.3400. Should it surpass that, the next target may be near the October 17 high of 1.3471. Conversely, if GBP/USD drops below 1.3300, the next significant support would likely be at the 50-day SMA of 1.3264, followed by 1.3200.
