GBP/USD Forecast: Pound Eyes 1.33854 Amid U.S. Dollar Strength and Trade Deal Dynamics

Introduction

The GBP/USD currency pair is poised for a potential push toward 1.33854 today, driven by a confluence of global economic developments and market sentiment. On Tuesday, July 29, 2025, the U.S. dollar continues to exhibit broad-based strength, fueled by the recent U.S.-EU trade pact announcement, which has averted a potential global trade war. This framework agreement, combined with anticipation for upcoming U.S. Federal Reserve and Bank of Japan meetings, is shaping market dynamics. Additionally, the UK's favorable trade deal with the U.S., securing a 10% tariff rate compared to the EU's 15%, is providing a relative boost to the British pound against the euro, and influencing GBP/USD movements.

U.S. Dollar Strength: A Key Driver for GBP/USD

The U.S. dollar has been on a robust upward trajectory, bolstered by the announcement of a U.S.-EU trade deal on Sunday, July 27, 2025. The agreement, finalized between U.S. President Donald Trump and European Commission President Ursula von der Leyen, sets a 15% tariff on most EU goods imported into the U.S., a significant reduction from the previously threatened 30% rate. This deal, which includes substantial EU investments in U.S. energy ($750 billion) and military equipment, has reduced market uncertainty and enhanced the dollar's appeal as a safe-haven currency.

The dollar's strength is further supported by solid U.S. economic data, suggesting that the Federal Reserve may delay resuming interest rate cuts. On Friday, July 25, 2025, the dollar advanced as economic indicators pointed to a resilient U.S. economy, with expectations of robust Nonfarm Payrolls data reinforcing the Fed's cautious stance. The Federal Reserve's upcoming policy meeting on Wednesday, July 30, 2025, is anticipated to maintain the federal funds rate at 4.25%-4.50%, with investors closely monitoring Fed Chair Jerome Powell’s comments for hints on future rate decisions.

This dollar rally has exerted pressure on the GBP/USD pair, with the pound dipping to a one-week low of 1.3401 on Monday, July 28, 2025. However, the pair is showing signs of recovery, with market forecasts suggesting a potential climb to 1.33854 today, driven by short-term bullish sentiment and technical factors.

UK’s Trade Deal Advantage: Sterling’s Edge Over the Euro

A significant factor supporting the GBP/USD pair is the UK’s favorable trade agreement with the U.S., which imposes a 10% tariff on British goods compared to the EU’s 15% rate. This deal, part of a series of trade frameworks announced by the Trump administration, positions the UK as a more competitive trading partner relative to the EU. The lower tariff rate is likely contributing to capital outflows from the euro to the pound, as evidenced by the sharp decline in the EUR/GBP cross, which suggests sterling is capturing investor interest.

The EU-US trade deal, while averting a full-scale trade war, has been perceived as asymmetrical, with the EU committing to significant investments in U.S. energy and infrastructure. This has led to a 1.2% appreciation in the euro against the dollar since the deal’s announcement, but the pound’s relative strength against the euro is more pronounced due to the UK’s better tariff terms. Market analysts highlight that improving U.S.-China trade talks, which could further reduce global trade tensions, are also boosting risk appetite, indirectly supporting sterling’s gains against the dollar.

Technical Analysis: GBP/USD’s Path to 1.33854

From a technical perspective, GBP/USD is navigating a complex landscape. The pair has recently broken below a key support zone at 1.3365/75, as noted by analysts, but is showing signs of a pullback toward the mid-1.3400s. The forecast for GBP/USD to reach 1.33854 today aligns with market-implied pricing, which projects the pair at 1.3359 in one month, indicating a short-term bullish outlook.

Analysts at TradingView suggest that GBP/USD is forming a countertrend correction toward a liquidity zone, with resistance at 1.34160–1.34190 and a psychological level at 1.34500. A pullback to this zone, confirmed by bullish price-action signals, could propel the pair toward the forecasted 1.33854 level. However, a break below 1.3365 could trigger further downside, with key support levels at 1.3295 and 1.3250. The pair’s movement within an ascending channel, further supports the potential for a short-term rebound.

Central Bank Meetings: Federal Reserve and Bank of Japan in Focus

The upcoming meetings of the U.S. Federal Reserve and the Bank of Japan are critical events for GBP/USD traders. The Federal Reserve is expected to hold rates steady, but Powell’s remarks will be scrutinized for indications of future policy shifts. Recent comments from Powell emphasize the Fed’s commitment to anchoring long-term inflation, with concerns about tariff-driven inflationary pressures. The Fed’s cautious approach, combined with a resilient U.S. economy, supports the dollar’s strength, potentially capping GBP/USD gains in the medium term.

Conversely, the Bank of Japan (BoJ) is also expected to maintain its policy rate at 0.50%, with Governor Kazuo Ueda monitoring the U.S.-EU deal’s spillovers and Japan’s own trade agreement with the U.S. The yen’s persistent weakness, driven by Japan’s low interest rates and the U.S. trade deal’s stability, could indirectly influence GBP/USD dynamics, as the pair often correlates with USD/JPY movements. Traders are particularly focused on BoJ’s forward guidance, as any indication of a rate hike could bolster the yen and alter USD strength.

Brexit and UK Economic Data: Ongoing Pressures on Sterling

Despite the UK’s favorable trade deal, sterling faces headwinds from domestic economic challenges and lingering Brexit uncertainties. Weak UK economic data, including a slower labor market, has contributed to recent GBP/USD dips. The Bank of England (BoE), tasked with maintaining a 2% inflation target, is navigating a delicate balance, with potential rate cuts on the horizon if economic growth falters.

The EY Item Club upgraded its 2025 UK GDP growth forecast to 1% from 0.8%, driven by a 3.9% increase in business investment in Q1 2025. However, this growth may be unsustainable due to tariff-related uncertainties, which could dampen investor confidence in sterling. Brexit-related volatility remains a watchpoint, with the pound’s historical sensitivity to UK-EU relations adding complexity to its outlook.

Market Sentiment and Trading Strategies

Market sentiment toward GBP/USD is mixed, with short-term bullishness tempered by long-term bearish forecasts. According to market-implied pricing, the GBP/USD pair is expected to hover around 1.3374 in six months and 1.3383 in one year, suggesting limited upside potential beyond today’s target of 1.33854. The dollar’s strength, driven by trade deal clarity and Fed policy, contrasts with the pound’s vulnerability to UK economic data and global trade developments.

Traders can capitalize on GBP/USD’s volatility by employing strategies such as spread betting or CFD trading, which allow speculation on both rising and falling markets. The most liquid trading window for GBP/USD is between 2pm and 6pm UK time, when both UK and U.S. markets are open, offering tighter spreads. Key levels to watch include resistance at 1.34180–1.34190 and support at 1.3295, with stop-loss orders recommended below the imbalance zone to manage risk.

Conclusion

The GBP/USD pair’s potential push to 1.33854 today reflects a confluence of factors, including U.S. dollar strength, the UK’s favorable trade deal, and anticipation for central bank meetings. The U.S.-EU trade pact and the UK’s 10% tariff advantage over the EU’s 15% rate are bolstering sterling against the euro, indirectly supporting GBP/USD. However, the dollar’s rally, driven by solid U.S. economic data and Fed policy expectations, may limit the pair’s upside. Traders should monitor technical levels, central bank announcements, and ongoing trade developments to navigate this dynamic market. With careful risk management and a keen eye on macroeconomic events, GBP/USD offers opportunities for informed trading decisions in this evolving economic landscape.