GBP/USD price forecast: Pound steadies as BoE rate decision looms
GBP/USD hovers near key levels as BoE policy decision approaches
The British pound (GBP) is trading at $1.2947, as investors brace for the Bank of England's (BoE) interest rate decision on Thursday. Market expectations suggest that the BoE will hold rates steady at 4.50%, as policymakers navigate weak economic growth alongside inflationary pressures.
In February, the BoE cut its 2025 GDP growth forecast to 0.75%, citing concerns over tax increases and global trade uncertainty. At the same time, inflation remains a challenge, making it difficult for the central bank to commit to further rate cuts this year. Despite expectations of gradual easing in 2025, no adjustments are anticipated at this week's meeting.
GBP/USD price movement (February 2025 - March 2025) Source: TradingView.
Economic factors influencing GBP/USD
The UK labor market remains under scrutiny, with unemployment forecasted to rise to 4.5%, marking its highest level since 2021. Wage growth is also expected to slow, potentially affecting inflation trends. Meanwhile, UK economic data for January showed a 0.1% contraction in GDP, alongside a significant decline in factory output.
On the U.S. side, Fed officials are expected to keep rates unchanged on Wednesday, with a target range of 4.25%-4.50%. However, investors remain cautious as President Donald Trump’s policies raise economic concerns, potentially impacting inflation and long-term growth. The U.S. Dollar Index (DXY) has weakened to 103.50, providing mild support for GBP/USD.
Traders are also monitoring UK Chancellor Rachel Reeves' Spring Statement on March 26, which will offer updated economic forecasts. Additionally, U.S.-UK trade negotiations are progressing differently compared to the UK-EU talks, as the UK adopts a more conciliatory stance with Washington.
Technical outlook: Key levels to watch
GBP/USD is attempting to hold above the 200-day EMA at 1.27, reinforcing its long-term bullish structure. The RSI remains above 60, signaling that buyers maintain control. Key support levels are at 1.2775 (50% Fibonacci retracement) and 1.2618 (38.2% Fibonacci retracement). On the upside, 1.31 remains a strong resistance zone.
As previously discussed GBP/USD remains range-bound as traders await the BoE's policy stance. Inflation, wage data, and central bank guidance will be key determinants for the pound's direction in the coming weeks.
