Selling GBPUSD down to 1.3450 as pressure builds

The monthly outlook for GBPUSD points to moderate headwinds for the pound, with the pair likely to consolidate within a wide, volatile range. Here are the main reasons for such positioning.

Diverging central bank stance. In December 2025, the Bank of England (BoE) left its key rate at 4.00%, sticking to a more guarded, hawkish posture than the Federal Reserve (Fed) due to its deep-seated issues in the UK labor market. BoE Governor Andrew Bailey reinforced this notion, warning that inflation's path lower will be "rocky"—a clear sign that monetary policy won't be loosened quickly. 

Across the Atlantic, markets are betting that the Fed will kick off a rate-cutting cycle in February 2026. This policy divergence may theoretically give the pound a leg up. Yet, the greenback keeps finding bids as a go-to safe haven whenever geopolitical tensions flare.

Persistent service-sector inflation. Great Britain's figure is stubbornly parked around 3.8%—well above the regulator's target—while wage growth is cooling at a snail's pace compared to the US, where Core Personal Consumption Expenditures (PCE) are hovering near 2.3%. All in all, higher-for-longer UK rates are lending the pound some localized support.

Structural economic anchors. In fact, the sterling faces significant underlying headwinds.

Current account deficit: A chronic shortfall is made even worse by fading investment inflows, partly due to elevated energy costs. 

Weak external demand: Topping it off, softening demand in the European Union (EU)—the UK's major commercial bloc—is now putting a lid on export growth, thus acting as a constant drag on any pound rally.

Market sentiment: Sentiment data adds another caution flag. Retail traders are overwhelmingly long, a positioning that often precedes flat grinding or renewed declines.

All told, GBPUSD is trapped between a hawkish BoE and a dollar that investors flock to when times are tough. Technically, if the bearish tilt persists, the pair appears headed to retest the 1.3450 support zone.

The ultimate recommendation is to sell GBPUSD. Lock in profits at 1.3450. Place Stop Loss at 1.3550.

Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow entering a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.