GBP/USD Price Forecast: Pound Defends 1.36–1.37 Range Ahead of BoE Decision

GBP/USD Price: 1.36–1.38 Range Under Fed–BoE Crossfire

Macro Forces Driving GBP/USD Around 1.37

GBP/USD is trading in the 1.3650–1.3700 band after a sharp rejection from 1.3847, with the current print clustered near 1.3690–1.3695. The move is not random: it reflects a direct clash between a resurgent US Dollar driven by stronger data and a Pound supported by a still-hawkish Bank of England. The US Dollar Index has rebounded from the 96.8–97.0 area toward 97.5 after touching a four-year low near 96.3–96.4, but it remains capped under a falling 200-EMA around 98.2 on the short-term chart, so dollar strength is tactical, not yet a new uptrend. At the same time GBP/USD is holding above a rising trendline and the 200-EMA near 1.3600, which means the broader uptrend from the 1.30s is intact even after the latest pullback from 1.3860.

US Data And Fed Expectations: Why USD Is Bid But Not Dominant

The US side is fundamentally strong in the near term. ISM Manufacturing jumped from 47.9 in December to 52.6 in January, beating the 48.5 consensus and flipping back into expansion territory. Nonfarm Payrolls added 225,000 jobs versus 180,000 expected, and the 2-year Treasury yield has pushed up to roughly 4.55%, a three-month high. That yield move alone makes holding USD more attractive against lower-yielders and raises the bar for GBP bulls. The nomination of Kevin Warsh for Fed Chair reinforces the hawkish bias: markets see him as more comfortable with higher real rates and slower cuts. This is why the Dollar can gain even with the DXY still technically in a broader down-channel. The short-term message is clear: the Fed is in no rush to ease below the current 3.50%–3.75% corridor, and that supports USD dips and caps aggressive GBP/USD upside above 1.38 for now.

Bank Of England Positioning: Why GBP Still Has Support

The BoE backdrop is different. The Bank Rate sits at 3.75% after a 25-bp cut in December that passed on a tight 5–4 split. That vote structure matters: four MPC members were already uneasy cutting, and most guidance since then has stressed that the pace of future reductions is likely to slow. Markets price only about a 4% chance of a cut at the upcoming meeting and roughly a 60% probability of one move by Q3 2026, which is far from a full-blown easing cycle. UK inflation remains sticky, and the BoE knows how aggressively it had to fight price pressure through 2025. With headline GBP/USD still above 1.36 and only a few big figures below the 1.3847 January high, the BoE cannot afford to signal a dovish pivot that would dump the Pound. That reluctance to cut is why GBP has not collapsed even as the DXY bounced from sub-97 to the 97.5 area.

**UK Macro Mix: Weak Labour Market, Resilient Activity Supporting GBP/USD

The UK data set is mixed but not disastrous. Manufacturing PMI has ticked up from 51.6 to 51.8, a marginal improvement but important because it confirms the UK is not sliding into contraction while the BoE keeps rates near 3.75%. The labour market, by contrast, is softening, with enough slack to justify talking about future easing later in 2026. This macro combination — elevated but gradually moderating inflation, slightly better activity, and weaker jobs — effectively anchors the BoE in “wait-and-see” mode. For GBP/USD that translates into limited downside while 1.3600 and the rising 200-EMA hold, and limited upside while the market still believes the BoE will have to join the Fed in cutting later this year. The result is the 1.3600–1.3800 corridor that keeps getting traded and retraded.

**Dollar Structure: DXY Below Downtrend, Limiting USD Upside In GBP/USD

Technically, the Dollar’s rebound is more corrective than impulsive. The DXY has slipped from the 99.8 region down to around 97.4–97.5 and remains below both a falling trendline and the 200-EMA near 98.2. Short-term support sits at the 0.5 Fibonacci retracement around 97.2, with deeper levels at 96.8 and 96.3. RSI near 55 confirms improving but not overbought momentum. That setup supports a tactical sell-the-rally bias on DXY — for example, fading moves toward 97.6–98.0 with targets back to 96.8. For GBP/USD this means that even though US data are strong, the structural Dollar picture is not yet bullish. Every time DXY fails under the 98 handle, sterling gets room to defend 1.3650 and attempt a re-test of 1.3750–1.3800.

Short-Term GBP/USD Technicals: Trendline Support At 1.36, Resistance At 1.38

On the two-hour chart GBP/USD is holding above a rising trendline and the 200-EMA clustered around 1.3600. The pair has already bounced from the 1.3646–1.3662 area toward 1.3685–1.3695, with Fibonacci retracement support at 1.3685 (0.382 of the last leg). Immediate resistance sits at 1.3750, followed by the 1.3800 zone that capped price action after the January 1.3860 high. RSI has recovered from roughly 40 to the mid-40s, which signals the aggressive downside momentum has faded but buyers have not fully seized control. The Economies.com read of oversold RSI and price leaning on the 50-day EMA is consistent with what the intraday structure is already telling you: this is a corrective pullback inside a still-bullish medium-term GBP/USD trend, not a confirmed top, as long as 1.3580–1.3600 holds.

Volatility And Options: Market Pricing Bigger Swings In GBP/USD

One-month implied volatility in GBP/USD has climbed from about 7.8% to 9.5% over the last week. That is not crisis-level vol, but it is a meaningful step up that tells you the options market is pricing larger intraday swings around macro events. With the BoE decision, US services PMI and weekly jobless claims all packed into the next few sessions, that repricing is rational. From a positioning standpoint, more expensive options change the calculus: outright long gamma becomes costlier, and traders lean more on structures like put spreads or covered call sales. That aligns with the tactical playbook derived from spot levels — buying downside below 1.3600 via puts, and selling upside volatility near 1.3750–1.3800 while the Dollar remains firm.

Event Risk: BoE, Fed Messaging And Political Noise Behind GBP/USD

On the event side, GBP/USD is sitting in front of a dense cluster of catalysts rather than a single binary. The BoE is expected to leave the Bank Rate at 3.75%, but the statement and vote split will drive the next leg. A repeat of the 5–4 pattern with firm language on inflation would be GBP-supportive, especially if the Governor emphasizes that cuts beyond one or two moves are not guaranteed. On the US side, Kevin Warsh’s nomination has already reset the market’s perception of Fed risk: a Chair perceived as more hawkish reduces the probability of the Fed cutting aggressively below 3.5%. At the same time, political noise around President Trump’s trade agenda, new tariffs, and the government shutdown delays key data such as the official January jobs report, forcing traders to rely on private indicators. That uncertainty keeps the Dollar from running away to the upside and leaves GBP/USD caught between macro strength and policy fog.

**Sentiment And Risk Appetite: How Macro Deals And Trade Policy Feed Into GBP/USD

Improved risk sentiment is another constraint on broad USD appreciation. The US–India trade deal, where India agreed to stop buying Russian oil in exchange for lower tariffs and increased access to US exports, is the type of risk-on headline that encourages flows into equities and higher-beta currencies instead of pure defensive Dollar buying. At the same time, the absence of an immediate trade war escalation and the Senate’s movement toward a funding compromise reduce tail-risk demand for USD cash. For GBP/USD this mix translates into a bias to buy dips toward 1.3650 rather than chase Dollar strength at 1.36 flat. When sentiment improves and DXY fails to clear 98, GBP tends to outperform lower-yield, lower-beta peers, especially with UK rates still relatively elevated at 3.75%.

Trading Levels: Where GBP/USD Bulls And Bears Are Positioned Now

From a flow standpoint, the market is clearly clustered around a few levels. On the downside, 1.3650 is the first pivot; sustained trade below opens 1.3600, which coincides with the 200-EMA and the rising trendline support. A break and daily close under 1.3580 would be the first real signal that the medium-term uptrend from the 1.30s is failing and that a deeper corrective leg toward 1.3450–1.3500 is in play. On the upside, 1.3700 is the intraday trigger level: a clean reclaim with volume would invite tests of 1.3750 and then 1.3800. Only a decisive daily close above 1.3800, followed by a push back toward 1.3847 and beyond, would confirm that GBP/USD is ready to resume its climb rather than remain trapped in this 200-pip range.

Positioning Verdict On GBP/USD: Buy The Dip, Not The Breakout

Given this entire backdrop — DXY capped below its 200-EMA near 98.2, GBP/USD holding above 1.3600 with trendline support, BoE still more constrained on cuts than the market implies, and the Dollar rally driven by a handful of upside surprises rather than a structural regime shift — the balance of evidence favours a Buy stance on GBP/USD, but with clear risk parameters. The asymmetric trade is to accumulate longs into 1.3650–1.3600 with a defined exit under 1.3580, targeting a move back through 1.3750 and into the 1.3800–1.3840 band as volatility around central bank communication fades. At these levels the pair is not cheap enough to justify blind leverage, but the combination of technical support, option market repricing, and still-supportive UK rate differentials argues that dips below 1.37 are buying opportunities rather than a signal to flip outright bearish on GBP/USD.

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