GBP/USD softens to near 1.3250 in Thursday’s early European session. The negative outlook for the pair persists beneath the 100-day SMA, accompanied by bearish RSI momentum. The initial support level is identified at 1.3202; the immediate resistance level to monitor is 1.3311. The GBP/USD pair is currently positioned in negative territory, hovering around 1.3250 during the early hours of trading in Europe on Thursday. The British Pound edges lower against the US Dollar amid widening monetary policy divergence between the Bank of England and the US Federal Reserve. The US weekly Initial Jobless Claims report and the Fedspeak will attract attention later in the day. BoE policymaker Alan Taylor stated on Tuesday that it remains uncertain whether a singular rate hike by the central bank would effectively address inflation without inciting unnecessary market speculation regarding additional increases. Traders are factoring in approximately 33 basis points of monetary tightening from the BoE by year-end and over 100 basis points by the end of 2027, based on data compiled by LSEG.
However, analysts generally anticipate a more restrained approach. Softer-than-expected US Personal Consumption Expenditures inflation data weigh on the Greenback and act as a tailwind for the major pair. Financial markets currently assign a probability of approximately 38.2% to a rate hike in October, a decrease from around 45% prior to the release of the US PCE data, as indicated by the CME FedWatch Tool. Analysts note that the UK growth backdrop has improved, with the bank having “raised their forecast for growth in Q3 to 0.4% up from their previous projection of 0.1% set back in July.” They argue that “stronger growth will encourage the BoE to tighten policy soon if higher energy prices conte to prove more persistent,” and highlight that one senior official at the central bank “judges that risks to the inflation outlook are ‘more titled to the upside’.” Beyond the near-term policy implications, MUFG also points to the evolving political landscape, suggesting that greater openness to closer EU ties “opens up the possibility for a potential reverse-Brexit trade for the pound in the future.”
Fed’s Kashkari conveyed a distinctly hawkish message, reflected in an FXS Speechtracker score of 7.1/10, surpassing the historical average of 6.2/10. This highlights the ongoing concern that inflation, currently near 3%, is still considered “too high” despite recent data trends. The emphasis on a resilient economy, strong consumer spending, and broad job availability, alongside doubts about the true tightness of policy and a potentially higher neutral rate, reinforces a bias toward further tightening. This is underscored by the anticipation of one more hike this year and another in 2027, while still aiming to manage inflation with only modest measures. Overall, the tone indicates that the Fed remains unconvinced that the existing policy settings are adequately restrictive to ensure a return to target. The FXS Fed Sentiment Index declined by 0.42 points to 143.28, indicating a slight reduction in perceived hawkishness, although the index continues to hold well above the neutral threshold of 100. This configuration indicates that, despite a slight softening versus recent readings, Fed communication as captured by the FXS Fed Sentiment Index and FXS Speechtracker remains firmly in hawkish territory, consistent with Kashkari’s openness to additional rate hikes and an elevated neutral rate.
In the daily chart, GBP/USD exhibits a bearish near-term bias as it remains positioned below the 100-day simple moving average and the 20-period middle band of the Bollinger Bands. The pair is approaching the lower Bollinger band, with the Relative Strength Index at 33.20 positioned just above the oversold threshold, suggesting that while downside momentum persists, it may be approaching a point of exhaustion. On the downside, the immediate support level is situated at the low of 1.3202 recorded on September 29, followed by the Bollinger lower band around 1.3140. A daily close beneath this threshold would reveal the November 20, 2025 low of 1.3038, followed by the significant psychological level at 1.3000. On the topside, initial resistance is positioned at the September 30 high of 1.3311, progressing toward the Bollinger middle band at 1.3385, and the 100-day SMA at 1.3415. A more distant upside barrier is situated at the upper Bollinger band near 1.3630.
