- GBP/USD forecasts point to further gains to 1.4000 provided the Fed shows a dovish stance in today’s meeting.
- The pound still has an advantage against the dollar amid recent upbeat British data, prompting the Bank of England to rethink its aggressive easing policy.
- Technically, the price is still in a strong uptrend with a risk of taking profits before rising further.
The British pound approached 1.3800 on Wednesday as the US dollar faced selling pressure ahead of the Fed’s first policy decision of 2026. The Fed is expected to keep interest rates at 3.50%-3.75%. However, political tensions over central bank independence are weighing on the dollar. As rumors of management pressure on Chairman Powell raise concerns about future US monetary policy, investors are pricing in a “governance premium.”
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The British pound has a clear runway due to a weak dollar and strong local data. December retail sales rose 0.4%, alleviating recession fears and indicating that UK consumers are handling higher borrowing rates better than expected. These numbers have prompted the Bank of England to reconsider its aggressive easing course, which is contrary to the Fed’s policy.
The pair’s momentum is being boosted by global macro trends that favor commodities and currencies with high beta over the dollar. Gold prices have reached record levels, and new threats of US tariffs are disrupting global trade, making the pound a major beneficiary of capital rotation away from dollar-denominated assets. UK inflation remains at 2.1%, supporting the Bank of England’s dovish stance and the pound’s yield advantage.
Markets are increasingly focused on the FOMC press conference late in the New York session. Any evidence that the Fed is giving in to political pressure to cut interest rates could break the resistance level at 1.4000. On the other hand, if Powell remains data-driven and hawkish, traders may cover dollar short positions, reflecting the rise in sterling.
GBP/USD Technical Forecast: Buyers target 1.4000
GBP/USD broke above the 1.3800 level, hitting a new 4-year high at 1.3860 before correcting down to the 1.3790 area. The broken supply area around 1.3800 now acts as support, with expectations 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 very overbought, which could lead to a correction to test the 20-period moving average at 1.3700, before the 1.3600 level. Only sustained weakness below the 20 period moving average can trigger a trend reversal.
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