GBP/USD Price Forecast: Declines below 1.3550, while maintaining bullish bias above 100-day SMA

The GBP/USD pair trades in negative territory around 1.3545 during the early European trading hours on Tuesday. Federal Reserve (Fed) Chair Kevin Warsh’s hawkish remarks at the Jackson Hole symposium underpin the US dollar (USD) against the British Pound (GBP). 

Warsh said on Friday during his first Jackson Hole speech that with inflation “running above our 2 percent target, the Fed’s predominant focus right now should be ’that underlying inflation is moving to our objective, clearly, and at sufficient speed … otherwise, we have work to do.” 

Expectations of a September Fed rate hike rose to 65.4% from below 40%, according to the CME FedWatch tool. Economists said the key determinant could be what the next round of inflation data reveals. 

BoE tightening expectations build as markets eye UK budget

Strategists at Scotiabank highlight that market pricing has turned more constructive on BoE tightening prospects, with investors currently assigning “a ~60% chance of a 25bpt at the next BoE meeting on September 16” and “a cumulative 36bpts of tightening by year-end.” They add that, in terms of sentiment, “the October 28 budget” will be crucial, noting it “will remain a key focus for markets over the next coupld of months” as investors assess the UK’s fiscal stance alongside the evolving policy outlook.

Warsh flags unfinished inflation fight, keeps Dollar bulls

Fed Chair Warsh delivered a notably hawkish-leaning message, with a 7.4/10 FXS Speechtracker score standing above the 6.5/10 historical average and underscoring elevated concern on price stability. The insistence that the Fed must be “confident underlying inflation is moving to objective, or we have work to do,” combined with the view that financial conditions are not restrictive and credit markets show few signs of policy restraint, points to a bias toward further tightening or at least a higher-for-longer stance. Warsh’s emphasis that recent better inflation prints do not yet signal a meaningful change in underlying trends, alongside a firm commitment to the 2% PCE target, reinforces a tone that is supportive for the Dollar and broadly negative for risk-sensitive assets.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated level of 129.70, which keeps the policy narrative firmly in hawkish territory despite the lack of incremental shift. The combination of a stronger-than-baseline FXS Speechtracker score and a high FXS Fed Sentiment Index level suggests markets will continue to price persistent Fed vigilance on inflation, with implications for Dollar strength and higher front-end yields.

Technical Analysis: GBP/USD retains a bullish vibe above the 100-day SMA

In the daily chart, GBP/USD sits above both the 100-day moving average (MA) and the lower Bollinger Band, keeping the near-term bias mildly bullish as price holds within the upper half of the recent volatility envelope. The Relative Strength Index (14) reading around 52 suggests neutral-to-positive momentum, hinting that buyers retain a slight advantage but lack strong conviction.

On the topside, initial resistance is located at the Bollinger middle band around 1.3550, followed by the upper Bollinger Band at 1.3668. A sustained break would open the way for 1.3700, representing the February 9 high and psychological level. 

On the downside, first support is seen at the August 28 low of 1.3526. The next contention level is located at the 100-day MA near 1.3445, with the lower Bollinger Band at 1.3432 reinforcing this demand area; a daily close below this zone would weaken the current constructive tone and expose deeper losses within the broader range.