• The greenback jumped after the Fed forecasted fewer rate cuts in 2025.

• Forecasts revealed that the Fed might only lower rates by 50 bps.

• Inflation jumped from 2.3% to 2.6% in the three months to October.

The GBP/USD forecast shows renewed support for the USD despite FOMC’s rate cut. The Fed left a hawkish statement regarding rate cuts in 2025. As a result, the pound collapsed despite lower expectations for Bank of England rate cuts. Market participants are now looking forward to US inflation data for more clues on the future of US monetary policy.

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The greenback jumped in the previous session after the Fed forecasted fewer rate cuts in 2025. The central bank lowered borrowing costs by 25 bps on Wednesday. However, forecasts revealed that the Fed might only lower rates by 50 bps. This was a significant drop from September when the central bank forecasted 100 bps in rate cuts. 

The shift in policy outlook came due to recent resilience in the US economy. Economic figures have shown inflation has paused its progress to the 2% target. At the same time, the labor market and consumer spending have remained robust despite high interest rates. Moreover, policymakers expect this to continue with the Trump administration.

On the other hand, traders are pricing in fewer rate cuts in the UK due to a robust labor market and high inflation. Wage data this week showed a surge in pay growth, which might keep the UK Central Bank cautious. At the same time, inflation jumped from 2.3% to 2.6% in the three months to October. Market participants expect the central bank to keep rates unchanged later in the day.

GBP/USD key events today

• Monetary Policy Summary
• MPC Official Bank Rate Votes
• Official Bank Rate

GBP/USD technical forecast: Lower low confirms downtrend

On the technical side, the GBP/USD price has collapsed and broken below the 0.618 Fib to make a lower low. As a result, the price has fallen well below the 30-SMA, showing bears are in the lead. At the same time, the RSI trades nearer the oversold region, suggesting solid bearish momentum. 

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Initially, bulls had attempted to break above the 30-SMA but could not go beyond the 1.2725 resistance level. Soon after, there was a surge in bearish momentum as the price made an engulfing candle that broke below the 0.618 Fib level. After the impulsive move, the price has paused to retest the Fib level as resistance. If it holds, the decline will continue with the new target at 1.2500 support.

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