GBP/USD fell about 0.35% on Tuesday, settling around 1.3350 after slipping below the 200-day Exponential Moving Average (EMA) for the first time since early December. The pair has pulled back sharply from its late-January high near 1.3870, shedding over 500 pips in a series of lower highs and lower lows. A cluster of mixed candles over the past two weeks had pointed to indecision, but the latest move lower suggests sellers are regaining control.
The Bank of England (BoE) held rates at 3.75% in February by a narrow 5-4 vote, with Governor Andrew Bailey casting the deciding vote to hold. Testifying before parliament’s Treasury Committee, Bailey said a March rate cut is “a genuinely open question,” noting that services inflation came in at 4.4% in January, well above the BoE’s forecast. Chief Economist Huw Pill echoed the caution, warning against cutting too quickly. However, the escalating conflict in the Middle East has added a new dimension; surging oil prices threaten to push UK inflation higher, and markets have begun to scale back expectations for a March cut. UK government bond yields rose sharply on Monday as traders repriced the rate path. Adding to the pressure on Pound Sterling, Labour’s loss in the Gorton and Denton by-election has renewed questions about PM Starmer’s leadership and Chancellor Reeves’s fiscal plans, with investors wary that political instability could lead to a looser spending stance.
On the US Dollar side, the Federal Reserve (Fed) held rates at 3.50% to 3.75% in January, with the minutes showing several participants discussed raising rates if inflation stays above target. The safe-haven Dollar has strengthened on the back of the Iran crisis, adding to headwinds for the pair.
GBP/USD daily chart
Technical Analysis
In the daily chart, GBP/USD trades at 1.3355. The near-term bias is mildly bearish as spot has slipped below the 50-day exponential moving average around 1.3510 and is now testing the 200-day EMA near 1.3375 from above. This loss of support from the shorter average signals fading upside momentum, while the longer average acts as last-line trend support. The Stochastic oscillator has recovered from oversold territory but holds in the mid-20s, indicating weak buying pressure and keeping the risk tilted to the downside while below the broken 50-day average.
Immediate resistance emerges at the 1.3400–1.3425 area, where recent closing prices clustered ahead of the 200-day EMA, followed by stronger resistance at the 1.3510 zone defined by the 50-day EMA. A daily close above 1.3510 would be required to neutralize the current downside bias and reopen the 1.36 region. On the downside, the 1.3300 handle is the first support beneath the 200-day EMA, with a break lower exposing the late swing low near 1.3200 as the next bearish target. As long as price holds below 1.3510 and momentum remains subdued, rallies are likely to face selling interest into nearby resistance.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data.
Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates.
When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP.
A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Source: https://www.fxstreet.com/news/gbp-usd-slips-below-key-averages-as-geopolitical-risks-mount-202603032301
