GBPUSD’s rally is capped despite eased geopolitical stress

GBPUSD seems to be losing confidence following its recent exit from a downtrend. The pair’s ascent was initially triggered by de-escalating trade tensions, as Donald Trump had second thoughts about the introduction of import tariffs against the European Union and the United Kingdom. Discharged air around the Greenland crisis weakened the US dollar and lent a hand to the pound, shifting market attention from geopolitics back to global economic data and diverging monetary policy paths.

On the flip side, the fundamental prospects of the UK GDP remain bleak, capping the pound’s upside. An unexpected surge in inflation to 3.4% in December and persistent service price increases left the Bank of England (BoE) with no choice but to be extra cautious regarding further rate cuts. The labor market is now cooling, retail sales are sluggish, and consumer spending isn’t promising anything good. Additionally, January saw only minimal growth in confidence, which was solely linked to personal finances, while the broader economic outlook deteriorated.

From a technical standpoint, bullish momentum is forming on the GBPUSD chart following its bearish decline. However, the pair’s advance is limited by resistance at 1.35075. The price is currently hovering near this level. The Stochastic Indicator confirms a moderate bullish uptick but holds below overbought territory. The Chaikin Oscillator echoes this cautiously optimistic signal, reflecting reduced selling pressure; though it remains in negative territory, which argues against a confirmed trend reversal. Bulls may only regain control upon a decisive breakout above the 1.35075 level.

The geopolitical factor supporting the pound has probably worn out, shifting market attention to the UK's relatively weak fundamentals. A resilient US economy and the greenback’s potential recovery could have a negative impact on GBPUSD.

Take a look at the following trading plan:

Sell GBPUSD at current levels. Place Take profit at 1.33850 and Stop loss at 1.35480.

This forecast remains relevant between January 23 and January 30, 2026.