GBP/USD Price Forecast - Pound Clings to 1.34–1.35 Zone After Supreme Court Tariff Shock

GBP/USD: Supreme Court Shock, Stagflation Fears And The 1.34–1.36 Battle

GBP/USD price context around 1.34–1.36

GBP/USD has dropped more than 3% from the late-January high and is now locked around the 1.34–1.35 band. Price is trading near 1.3460–1.3498, sitting almost on the 2026 yearly open at 1.3474. This comes after the big re-rating phase that started in 2025, when the first US Supreme Court tariff ruling sent the pair from 1.2850 to about 1.3087 in one session, a 1.84% jump and the strongest one-day gain in over three years. That spike was backed by hard flow: volumes in GBP/USD ran roughly 300% above a normal day in the first hour, one-month implied volatility jumped from about 7.8% to 9.2%, and the trade-weighted sterling index climbed from 98.7 to roughly 100.3. Since then, price extended higher into the 2026 peak and is now correcting back into structural support rather than collapsing into a new downtrend.

Tariffs, Supreme Court and the structural shift in USD risk premium

The tariff story is central to this pair. The earlier 6–3 Supreme Court decision invalidated Trump-era steel and aluminum duties of 25% and 10% on UK and EU imports. That removed a trade overhang that had cost UK exporters an estimated £3.2 billion a year and had forced both sides into years of legal and diplomatic fights. Markets immediately repriced: GBP/USD broke the 1.3000 cap, the dollar index fell around 0.7%, and banks lifted sterling forecasts by 3–5% for the following quarter. The fresh February 2026 ruling goes after a second legal pillar by blocking tariffs enacted under a national-emergency statute without Congress. That reduces the scope for unilateral US protectionism and chips away at the structural premium that the USD had been enjoying from the threat of new duties. For GBP/USD, this means tariff risk is no longer a one-way support for the dollar. Every legal limit on executive trade power tilts the medium-term balance a bit further toward sterling whenever US domestic data fail to strongly favour the greenback.

US macro mix: 1.4% GDP and 3.0% core PCE

The latest US data complicate the picture for USD. Q4 2025 GDP slowed hard, from 4.4% to 1.4% year-on-year, with the 43-day government shutdown flagged as a major drag. At the same time, core PCE rose to 3.0% year-on-year, above the 2.9% consensus and the prior 2.8%. That combination points toward a stagflation-style mix: weaker growth with inflation still too high. Initially, that kind of data can help the dollar via risk aversion. But once the Supreme Court headlines hit and the tariff premium started to fade, the USD gave back gains and the dollar index slipped to around 97.67, down about 0.14% on the day. Rate markets now price only about a 54% chance that the next Fed cut will come in June, down from almost 65% earlier in the week. So the US curve is still “higher for longer”, but the growth pulse is weaker and the inflation profile is messy. For GBP/USD, that means the dollar is not a clean yield-only story; it is a currency backed by slowing real activity, sticky prices and diminishing legal leverage on trade.

UK data: strong spending and PMIs versus soft labour and BoE easing risk

On the UK side, hard data have improved at the same time as labour indicators justify caution at the Bank of England. January retail sales jumped 4.5% year-on-year against a 2.8% forecast, a clear beat that signals resilient consumer demand. Flash PMIs for February show expansion in both services and manufacturing, pointing to a real pickup in activity rather than stagnation. Those numbers support earnings, tax revenues and the broader growth narrative, all of which help GBP. The labour market tells a more dovish story. The unemployment rate has ticked higher into Q4 2025 and wage pressure is cooling, giving the BoE cover to ease policy. Markets now price roughly an 80% probability of a March rate cut. By contrast, the Fed’s first cut is pushed out to June. That timing gap is a short-term headwind for GBP/USD, because earlier UK cuts normally weigh on the pound. However, if growth and spending stay firm, the BoE’s easing cycle is likely shallow. One or two early cuts followed by a pause is not a full pivot. In that scenario, strong UK data plus reduced trade friction can still support GBP against a USD struggling with growth and legal constraints.

Technical structure: 200-day average at 1.3443 and the 1.3339–1.3593 range

Technically, GBP/USD is trading at a critical inflection zone. Price has dropped out of the February opening range and is now moving inside a descending pitchfork drawn from the January 2026 high. At the same time, the longer-term pattern still reflects the earlier golden cross, where the 50-day moving average pushed above the 200-day, signalling a durable uptrend. The key levels are clearly defined. Immediate support is the 200-day moving average near 1.3443. The market has been oscillating around the 2026 yearly open at 1.3474, effectively using it as a pivot. On the topside, the first resistance is the old monthly opening-range low at 1.3509, followed by the 23.6% retracement of the January drop at 1.3537. Above that, a heavier resistance band sits near 1.3593, defined by the May and August swing highs and by the upper parallel of the current pitchfork. Holding above 1.3443 keeps the pullback from the high as a controlled correction within a broader bullish trend. A push back through 1.3509 and 1.3537 would confirm that sellers are losing control and would put 1.3593 back in focus. A clean daily close above 1.3593 would strongly argue that a more durable low is in place and reopen a move toward the 1.3749 region. A daily close below 1.3443 would shift the balance. First, the 1.3400 handle becomes the magnet. Beneath that, the 1.3339–1.3351 area, which combines the 61.8% retracement of the November advance and the 100% extension of the January downswing, becomes the prime downside target. That zone is where a deeper flush is most likely to exhaust and where a stronger base could form. A decisive break below 1.3339 would undermine the bullish medium-term structure and expose the broader 1.30–1.31 support base.

Cross-currency behaviour and position context for GBP

The weekly performance matrix shows that sterling is not simply dominating everything. Over the current week GBP is down about 1.16% versus USD and 0.35% versus the euro, roughly flat to slightly positive against the yen at around +0.17%, and weaker against high-beta currencies such as AUD (around –1.18%) and CAD (about –0.51%). Moves versus CHF and NZD are marginal, at roughly –0.21% and –0.11%. That pattern is consistent with a market that still respects the dollar’s rate and safety profile while selectively rewarding currencies with strong domestic stories. For GBP/USD, it confirms that the recent pullback is not a blow-off from an overbought pound; it is a measured retracement inside a more complex global FX regime, where tariff decisions, central bank timing and idiosyncratic data pulses all matter. It also tells you positioning is not yet stretched to a level that would force aggressive sterling liquidation on a minor shock.

Event risk map: State of the Union, PPI and BoE communication

Near-term risk is clustered around US politics, inflation prints and central bank rhetoric. In the US, Trump’s State of the Union and the upcoming Producer Price Index will feed directly into the rates narrative and the dollar path. If Fed speakers react to the 1.4% GDP and 3.0% core PCE by leaning harder on the inflation story, June cut odds could fall below current 54% pricing, which would support USD in the short run and cap GBP/USD rallies. If instead they highlight downside growth risks, the front end could rally, pushing yields and the dollar lower again. In the UK, any follow-up to the strong retail sales and PMI beats will shape expectations for the March BoE meeting. Softer data would validate the current 80% probability of a cut and keep a lid on sterling. Continued strength would make the BoE more cautious about easing and narrow the expected divergence versus the Fed, reinforcing support for GBP/USD beyond the immediate horizon. Trade policy noise remains a wildcard. The administration’s attempt to re-justify tariffs under other statutes could partially rebuild the US protectionist premium if successful. Failure, or a move by Congress to assert more control and push toward cleaner rules-based trade, would keep pressure on the dollar and favour the pound.

Bias and tactical stance for GBP/USD

Putting the pieces together, the balance of evidence leans to strength in GBP/USD once the current correction stabilizes. The pair is trading just above the 200-day average at 1.3443 and almost exactly on the yearly open at 1.3474, which is where medium-term buyers are expected to defend. Above 1.3443, the structure supports treating this move as a dip within an ongoing uptrend, with upside markers at 1.3509, 1.3537 and then 1.3593. A break of 1.3593 on a closing basis would reopen the higher 1.37 zone. A daily close below 1.3443 would shift focus to 1.3400 and then 1.3339–1.3351 as the decisive support cluster. That band is the line in the sand where a stronger base can form; only a sustained loss of 1.3339 would flip the broader picture to clearly negative. With US tariff leverage fading, US growth slowing, UK data surprising on the upside and the chart still respecting medium-term support, the directional bias at this stage is bullish GBP/USD, with preference for buying weakness into the 1.3443–1.3400 region and treating 1.3339/51 as the key risk boundary for that view.

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