- The GBP/USD forecast points to further gains to 1.4000 provided the Fed shows a dovish stance in today’s meeting.
- Sterling remains at an advantage against the dollar amid recent upbeat UK data, pushing the BoE to rethink its aggressive easing policy.
- Technically, the price remains in a strong uptrend with a risk of profit-taking before further upside.
The British pound approached 1.3800 on Wednesday as the US dollar encountered selling pressure ahead of the Fed’s first policy decision of 2026. The Fed is anticipated to keep interest rates at 3.50%-3.75%. However, political tensions over the central bank’s independence are weighing on the dollar. As rumors of administrative pressure on Chair Powell increase concerns about future US monetary policy, investors are pricing in a “governance premium”.
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Sterling has a clear runway due to dollar weakness and solid domestic data. December retail sales rose 0.4%, easing recession fears and suggesting that UK consumers are coping with high borrowing prices better than expected. These numbers have prompted the Bank of England to rethink its aggressive easing cycle, which runs counter to the Fed’s policy.
The pair’s momentum is boosted by global macro trends that favor commodities and high-beta currencies over the dollar. Gold prices have reached record highs, and new US tariff threats are disrupting global trade, making the pound a significant beneficiary of capital rotation out of dollar-denominated assets. UK inflation remains at 2.1%, supporting the Bank of England’s cautious stance and the pound’s yield advantage.
Markets are increasingly focused on the FOMC press conference in the late New York session. Any evidence that the Fed caves to political pressure to cut rates might break the 1.4000 resistance level. On the other hand, if Powell remains data-dependent and hawkish, traders may cover short dollar positions, reversing the sterling rally.
GBP/USD Technical Forecast: Buyers Aiming for 1.4000
The GBP/USD price broke above the 1.3800 level, marking a fresh 4-year top at 1.3860 before correcting down to the 1.3790 area. The broken supply zone around 1.3800 is now acting as support, with projections pointing to a test of the swing high at 1.3860, then 1.3900, and finally the psychological level at 1.4000.
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However, the RSI remains extremely overbought, which could trigger a correction to test the 20-period MA at 1.3700, ahead of 1.3600. Only a sustained weakness below the 20-period MA could trigger a trend reversal.
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