The near-term outlook for GBPUSD hinges on a widening policy rift between the Bank of England (BoE) and the US Federal Reserve (Fed), set against the backdrop of diverging economic data coming from two countries.
Most market participants see the pair staying on the defensive in the coming days (or approximately a week), likely extending its decline before finding a floor. Inside the so-called "Cable", the greenback continues to draw strength from its haven status amid global uncertainty.
But what's really propping up the dollar?
Sticky US inflation. The latest Consumer Price Index (CPI) data showed core figure cooling only modestly to 2.6%, with the headline one still holding at 2.7%. This keeps the American central bank in a hawkish box, supporting the greenback even though interest rate cuts in 2026 remain on the table.
Fed's cautious stance. Expectations for a slow and cautious easing cycle are sustaining the dollar well-bid as investors await clearer signals from upcoming jobs and inflation prints.
Speaking about the flip side of the pair, what's weighing on the pound? Here are a few factors to take into account:
Cooling UK economy. Signs of slowing GDP growth and a creeping unemployment rate strengthen the case for the BoE to pull the trigger on rate cuts sooner rather than later.
Earlier dovish pivot. Markets are betting that the UK regulator could kick off its easing cycle as early as March 2026, with more reductions in borrowing costs to follow. This erodes the pound’s yield appeal, as traders seek for other alternatives.
Even though there are many other facts to consider, the primary anchor for GBPUSD remains monetary divergence between the US and the United Kingdom.
From a technical perspective, the rally from October has officially reversed, with the price now confined to a bearish channel. A clean break below the 1.3400 support would pave the way for a decline to the 1.3275 area, confirming the next phase of the downtrend.
The ultimate recommendation is to sell GBPUSD after it pierces through 1.3400. Lock in profits at 1.3275. Place Stop Loss at 1.3540.
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.
This content is for informational purposes only and is not intended to be investing advice.
