GBP/USD Price Forecast - Pound Holds Around 1.34 As Tariff Shock And UK Inflation Twist Cable’s Next Move

GBP/USD – Tariff Shock, Wedge Setup And A 1.33–1.36 Decision Zone

Short-Term Price Map For GBP/USD Around 1.34

The GBP/USD pair is trading in a tight band around 1.3380–1.3415, having pulled back from the year-to-date peak at 1.3565–1.3567. That is roughly a 1.1–1.4 cent retreat from the high but still comfortably above the November low at 1.3015. On the day, one snapshot has GBP/USD near 1.3414, up about 0.28%, while the US Dollar Index sits around 99.08, down roughly 0.30–0.38%, showing that current Cable strength is driven mainly by Dollar selling rather than fresh Sterling euphoria.
On the monthly scoreboard the Pound is only modestly lower against the Dollar, down about 0.38%, while it is stronger against most other majors. Against the EUR, GBP is up roughly 0.63%; versus JPY, about 0.70%; versus CAD, about 0.95%; and slightly firmer against CHF by around 0.36%. The pressure point is specifically GBP/USD, not Sterling as a global story.

Tariffs, Greenland And Why The USD Is Taking The Hit

The macro shock is clear. The White House has announced new 10% import tariffs from February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and the United Kingdom, with an automatic ramp to 25% on June 1 if no agreement is reached on Greenland. European officials are preparing up to €93 billion in retaliatory measures or access restrictions for US firms, making this more than rhetoric.
Despite the UK being on that tariff list, the immediate loser has been the USD, not the GBP. The DXY is down around 0.30–0.38%, while GBP/USD trades higher on the day around 1.34. Market logic is straightforward: this escalation injects additional political risk premia into US assets and the Dollar. One senior Asia strategist framed it bluntly, arguing that the tariffs may look like an attack on Europe, but the price is being paid in the Dollar.
This is why the pair can rise even as the UK faces direct tariff risk. The US is seen as the policy aggressor, which undermines confidence in the Dollar at the margin. If this standoff deepens, the structural risk is that US assets carry a higher risk discount, putting a soft cap on sustained USD rallies unless the Fed is forced into a much more hawkish stance.

UK Growth, Jobs And Inflation – Why GBP Still Has Fundamental Backing

On the UK side, the hard data supports a Pound that trades firm on dips. Latest output figures show the economy grew 0.3% m/m in November, three times the consensus call of 0.1%. The services sector expanded 0.3%, and industrial production jumped 1.1%, helped in part by the recovery of Jaguar Land Rover after the prior cyber-attack. That is not booming growth, but it is clearly not recession-type output.
Forward-looking data this week will dictate how far GBP/USD can stretch. The jobs release is expected to show the unemployment rate easing from 5.1% to 5.0%, which is not ultra-tight by pre-Brexit standards but is still far from slack. Coupled with elevated wage growth, that keeps the labour market in a zone where the Bank of England cannot simply slash rates without risking another inflation overshoot.
Inflation remains the central constraint. Headline CPI is expected around 3.3% year-on-year in December, matching November’s 3.3% and staying well above the 2% target. Core CPI is projected near 3.3%, and the Retail Price Index (RPI) is seen rising from 3.8% to about 4.0%. As long as headline inflation holds in the 3–4% band and unemployment sits near 5.0%, the bar for a rapid cutting cycle is high. That is naturally supportive for GBP, especially against a USD where the market still prices a path of easing once the current volatility around tariffs and growth passes.

Event Risk For GBP/USD – UK Data Versus US Davos Rhetoric

In the immediate term, GBP/USD is a pure event-driven pair. The UK employment and CPI releases will define how sustainable the current bounce from 1.3380 is. Stronger-than-expected job and wage prints, alongside sticky or higher CPI and RPI readings, tilt the balance toward a retest of 1.3500–1.3565 as markets push out BoE cut expectations again.
On the US side, traders will dissect jobs, housing data and the President’s Davos speech. A speech that doubles down on tariffs and Greenland will reinforce the Dollar-negative narrative and allow GBP/USD to grind higher even if UK data only meets expectations. Conversely, any signal of moderation on tariffs or a stronger US labour print could temporarily stabilise the USD, making it harder for Cable to hold above 1.34 without additional UK tailwinds.
With US markets shut for Martin Luther King Jr. Day, liquidity is thinner. That can exaggerate intraday spikes above 1.34 or below 1.33, but the real signal will be daily closes following the UK data cluster, not the holiday prints.

Structure Of GBP/USD – From 1.3015 Base To 1.3565 Peak

From a pure price-action perspective, GBP/USD has moved in a clear three-stage sequence. First, the pair carved out a base at 1.3015 in November. Second, it rallied to a year-to-date high around 1.3565–1.3567, registering a roughly 5.5 cent move higher. Third, it retraced to the current 1.3380–1.3415 region, giving back about 1–1.5 cents of that advance.
That pullback has taken the pair just below the 23.6% Fibonacci retracement of the 1.3015–1.3565 leg and under the 25-day exponential moving average, signalling a pause in momentum rather than a full trend reversal. Crucially, spot is oscillating around the 200-day simple moving average near 1.3400, which is the line that separates trend continuation from a deeper correction.

Falling Wedge And Moving Averages – Why 1.3285 And 1.3565 Matter For GBP/USD

The corrective leg from 1.3565–1.3567 down to 1.3380 has taken the form of a falling wedge, built from two descending and converging trend lines that began at the recent high and intersect with the November rally. Historically, this pattern often resolves upward when it forms after a strong impulsive move, especially if the macro backdrop is mildly supportive for the higher-yielding side of the pair.
From a tactical trading perspective, the short-term grid is already mapped. A bullish configuration uses a buy on dips approach with a target back at 1.3565 and risk defined below 1.3285. In that frame, 1.3285 is not a random figure; it sits just above the deeper support band around 1.3300 and protects the structure of higher lows that runs from 1.3015 upwards.
The alternative bearish configuration flips those levels: a short position targeting 1.3285 with a stop at 1.3565 assumes that the wedge breaks down, the 200-day SMA at 1.3400 fails, and price grinds through the 50-day SMA near 1.3325 toward the December congestion around 1.3300. A clean daily close below both 1.3325 and 1.3300 would make that scenario more credible and increase the odds of a re-test closer to 1.3015.

GBP Versus Majors – Cable Weakness Is Not A Sterling Collapse

The performance heat-map underlines that GBP is not broadly broken; the pressure is concentrated in GBP/USD because of Dollar-specific factors. Month-to-date, Sterling has gained about 0.63% versus the EUR, around 0.70% against the JPY, and nearly 0.95% against the CAD. It has small gains versus the CHF, and marginal underperformance against AUD and NZD where it is off roughly 0.53–0.29%.
Those numbers fit a world where investors are rebalancing across the G10 rather than abandoning Sterling. The pair GBP/USD gets pushed around by changing expectations for the Fed–BoE rate gap, tariff-driven risk sentiment and safe-haven flows, but the Pound remains relatively firm within the broader basket. That relative resilience means dips in Cable toward the low-1.33s continue to find buyers who understand that UK real yields and policy settings are not aligned with a structurally weak currency.

GBP/USD Trading View – Bullish Bias, Buy On Dips While 1.33 Holds

Putting the pieces together, the current setup for GBP/USD still tilts constructive rather than outright bearish. The pair has: a base at 1.3015, a strong impulsive leg to 1.3565–1.3567, a controlled pullback to 1.3380–1.3415, a falling wedge that usually favours upside breaks, and a macro mix that includes UK growth of 0.3% m/m, services and production both expanding, inflation stuck near 3.3–4.0%, and an unemployment rate expected around 5.0%. On top of that, fresh 10–25% tariff threats have pushed the USD lower, with the DXY around 99.08, while the Pound has held or gained against most other majors.
As long as the pair defends the 1.3325–1.3300 band and does not close decisively below 1.3285, the bias remains bullish, and the pair looks like a Buy, with a primary upside focus on a retest of 1.3565 and secondary potential beyond 1.36 if UK data surprise on the upside and US political risk continues to weigh on the Dollar. A sustained break under 1.33 would downgrade that stance to neutral and open room back toward 1.31, but the weight of the current data argues that dips into the low-1.33s are more likely to be accumulated than aggressively sold.

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