GBP/USD Price – Fed–BoE Split, DXY Above 99 and Why 1.34 Is a Weak Floor
US side of GBP/USD
GBP/USD around 1.3420 is trading where the dollar is in control, not sterling. The pair failed above 1.3567, printed a clear short-term top there, and then bled lower into the 1.34 handle as US data rebuilt the bid under USD. ISM services surprised to the upside, with new orders and prices paid still elevated, locking in sticky services inflation. ADP private employment beat forecasts. One recent Nonfarm Payrolls report showed 50,000 jobs added versus 60,000 expected, but the details were dollar-positive: unemployment dropped to 4.4% from 4.5%, and average hourly earnings accelerated to 3.8% year-on-year versus 3.6% expected. Another major jobs release printed 210,000 new jobs, confirming that labor demand remains firm. That combination forced the market to rethink the Fed path. The probability of a March cut collapsed from above 70% to roughly 40%, and the expected 25 bp move to a 3.50%–3.75% target range at the coming meeting is now framed as a “hawkish cut” – third reduction this year, but with guidance pointing to a pause in early 2026 rather than an easing cycle. Higher US yields plus a slower Fed are exactly what you do not want if you are long GBP/USD near 1.35.
BoE, UK macro and why GBP is the weak leg
On the UK side, the setup is almost the mirror image. Headline inflation has cooled toward 2.5%, only slightly above the Bank of England’s 2.0% target, while growth remains soft and the labor market is losing heat. Markets are now pricing close to an 88% chance of a 25 bp cut at the next BoE meeting, with investors expecting the Bank to move earlier and more cautiously than the Fed. The fiscal backdrop does not help: higher tax burdens after the autumn budget keep UK disposable income under pressure and reinforce the view that UK domestic demand will stay weak. That policy mix – a Fed that cuts to 3.50%–3.75% and then hesitates, versus a BoE under pressure to ease into a fragile economy – structurally favors USD over GBP. You can see it in behavior: despite no major UK shock last week, GBP/USD fell from above 1.35 to the 1.34 zone almost entirely on US news, with sterling acting as a passenger. UK assets can still rally in equities, but the currency is the release valve.
Equities, FTSE 100 at 10,000 and what it says about GBP
The FTSE 100 closing above 10,000 for the first time tells you where the value is perceived. A weaker pound versus past levels boosts foreign earnings when translated, so index points rise even when the domestic picture is mediocre. Yields explain the rotation: investors are happy to “swap” a 4% government bond for a 7% dividend stream from an insurance stock. Names like London Stock Exchange Group or Melrose Industries trade with implied upside – in one case, analysts see roughly 40% undervaluation, in another the PEG ratio is 0.9 at 16.2x forward earnings versus 2.7 for Rolls-Royce. That is equity support, not currency support. Strong FTSE at 10,000 with GBP/USD stuck around 1.34 just confirms the old pattern: international investors like UK assets, but they prefer to own the cashflows and stay underweight the currency.
DXY, risk tone and cross-asset confirmation for USD
The dollar’s broad tape backs up the pressure on GBP/USD. The US Dollar Index found solid demand around a key Fibonacci level near 97.94, built an ascending triangle from the Christmas lows, and then punched through the 98.85–99.00 resistance band. That breakout opens a path toward the 100.00–100.22 supply zone. As long as DXY trades above 98.85, USD has both technical and macro justification to stay bid, which caps any recovery in GBP/USD beyond the mid-1.35s. Cross-asset signals line up. Gold trades around 4,400 dollars, and the measured move from its ascending triangle targets roughly 4,900 dollars; that is an unusually high gold price given firmer USD and rising US yields, which signals demand for hedges and risk aversion. Silver is threatening a sustained break above 80 dollars with 70 as a floor, another sign that fear is elevated. Crypto tells the same story: Bitcoin is struggling to hold below the 90,000 dollar region as ETF outflows spike, showing that the market is de-risking from the most speculative corners. In that environment, high-beta currencies like GBP tend to underperform against a “defensive” USD, and GBP/USD becomes a natural short on bounces rather than something to buy on weakness.
Short-term structure in GBP/USD – from 1.3567 top toward 1.3360–1.3350
On the daily chart, GBP/USD put in a clear short-term peak at 1.3567. After that, the pair slid below its 100-day moving average, with the 20- and 50-day moving averages turning down and crossing into a bearish alignment. Price is now pressed against the 1.3400 demand area. The market has already tested under 1.3400 and bounced back to about 1.3420, which shows buyers defending the first approach to the figure but without strength for a meaningful reversal. Below 1.3400, multiple support layers converge. The 1.3360–1.3375 band has been flagged repeatedly, and the 55-day EMA sits almost in the center near 1.3366. A wider cluster at 1.3355–1.3371 aligns with Fibonacci support and stands just above the 200-day moving average around 1.3350. As long as spot trades below 1.3567 and under the 100-day average, every move into 1.3500–1.3567 looks corrective inside a down-swing, with risk skewed toward a clean test of 1.3360–1.3350 rather than a squeeze back through 1.36.
Medium-term map for GBP/USD – 1.3787 peak, 1.3008 floor and 1.2474 as the deep line
Stepping back, the 1.3787 high posted in 2025 remains the main medium-term pivot. Price action from that point down looks like a correction within the broader recovery from 1.3051, not a new secular bull market for GBP/USD. The latest rally to 1.3567 and failure there simply left the corrective structure unfinished. If the 1.3366 EMA and the 1.3360–1.3350 shelf break decisively, the current slide likely becomes the next leg of that correction. In that case, the next obvious magnet is the 1.3008 support level, which has been a major floor in the broader pattern and matches previous swing lows. Further down, the 38.2% retracement of the 1.0351–1.3787 advance sits near 1.2474. As long as GBP/USD stays above 1.2474, the post-1.0351 recovery can still be treated as intact, even if the pair trades through a multi-figure correction. The long-run picture for sterling remains heavy: a durable trend reversal would need a break and weekly close above the 1.4248–1.4480 resistance zone, which corresponds to the 38.2% retracement of the massive 2.1161–1.0351 decline. With the Fed–BoE policy gap where it is, those levels are far from the current 1.34–1.35 reality.
Alternate bullish ladder – 1.3275 breakout, fibs to 1.3455–1.3460 and 1.3500–1.3600
There is a constructive path for GBP/USD, but it currently looks like the lower-probability scenario. Technicians point out that the overnight break through 1.3275–1.3280 – where the 200-day simple moving average and the 38.2% retracement of the September–November downswing sat – was the original “go” signal for GBP bulls. As long as that breakout is not fully reversed, the structure still allows for a fib-ladder higher. Sustained trade above the 50% retracement at 1.3365 supports a reclaim of the 1.3400 handle. If buyers can then force a close over the 61.8% retracement in the 1.3455–1.3460 band, the door opens to the 1.3500 psychological level and a retest of the 1.3567 top. In this scenario, the key downside checkpoints are clear: 1.3300 as the first line, then the 1.3280–1.3275 breakout area, followed by 1.3225 and the 1.3200 round number. A decisive break below 1.3200 would invalidate the constructive picture and hand control back to bears targeting 1.3145–1.3140 and then sub-1.3100 levels. For now, price is hovering closer to the lower half of that structure, which means the market is testing whether 1.3275–1.3280 can really act as a longer-term base or whether it was just a temporary breach.
Weekly tactical view – 1.34, 1.32 and what to do between them
The weekly GBP/USD forecast from broader FX coverage lines up with this tension. The pound initially pushed higher this week but “turned sour” in the last couple of days, with the 1.35 level proving to be stiff resistance. Analysts now flag 1.35 as the cap on the upside and 1.34 as the line whose break would invite another leg lower. If spot falls and closes under 1.34, momentum traders will start aiming for the 1.32 area as the next obvious target. On the other side, it would take a clean move through 1.36 to put real upside momentum back into play and shift the conversation from “sell rallies” to “buy dips.” Given the US macro backdrop and the Fed’s hawkish-cut setup, the “best-case” for the pound in the near term might actually be a noisy consolidation between roughly 1.32 and 1.36, with 1.34–1.35 acting as the noisy mid-range – but the balance of probability still favors a test of the lower half of that band rather than the top.
Event risk queue – US CPI, PPI, retail sales and UK GDP as triggers for GBP/USD
Near-term direction for GBP/USD will be set by data tapes, not by lines on a chart. On the US side, CPI, PPI and retail sales are the next big catalysts. If CPI stays near the previous 3.5% year-on-year reading or pushes higher, and PPI plus retail sales confirm resilient demand, then the market will push Fed cuts further out, keep yields elevated and likely force GBP/USD through the 1.3360–1.3350 floor toward 1.3300 and eventually 1.3008 if the strong-dollar narrative persists. If, instead, US inflation cools decisively and retail sales show the consumer finally slowing, DXY could slip back below 99.00 and allow GBP/USD to rebound into the 1.3450–1.3500 band or retest 1.3567. On the UK side, the upcoming GDP print can only help sterling if it is clearly above consensus. A soft or only marginally better-than-expected figure will just confirm the view that the BoE has less room to resist easing than the Fed, capping any upside reaction. Overlay that with global risk sentiment: if gold keeps grinding from 4,400 toward 4,900, silver holds above 70–80, and indices like the NASDAQ 100 orbit 26,000 with 25,000 as a floor, then the bias is still for cautious risk and strong USD, which works against a sustained GBP/USD rally.
Verdict on GBP/USD – stance, direction and how to trade it
Putting all of this together – Fed at 3.50%–3.75% with a “hawkish cut,” DXY breaking 98.85–99.00 and eyeing 100.00–100.22, UK inflation near 2.5% with growth and labor cooling, the BoE facing an 88% priced-in cut, FTSE 100 at 10,000 because investors like UK assets but not the currency, and a technical picture where 1.3567 is a firm cap while 1.3360–1.3350 is under threat – GBP/USD at roughly 1.3420 is a Sell, not a Buy or a Hold. The pair is sitting just above a dense but vulnerable support cluster with macro, cross-asset and policy forces leaning toward USD strength. The tactical approach is straightforward: treat rallies into 1.3450–1.3500 and especially into 1.3500–1.3567 as opportunities to go short GBP/USD, with initial targets at 1.3360–1.3350, then 1.3300, and, if US data keeps beating and DXY pushes toward 100.22, an extension toward 1.3008 over time. The bullish path via 1.3455–1.3460, 1.3500 and a retest of 1.3567 exists but requires a clear negative surprise on US data or a positive shock from UK GDP, neither of which is currently the base case. Until those conditions appear, the weight of evidence says GBP/USD is a sell-on-rallies, with downside risk toward 1.32 in the weekly horizon and 1.3008–1.2474 on any sustained dollar up-leg.
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