GBP/USD Price Forecast - Pound Holds 1.36 as US CPI Hits 2.4% and Markets Bet on a BoE Cut to 3.50%

GBP/USD – 1.36 pinned between softer US CPI and fragile UK data

GBP/USD around 1.3640–1.3635 – why this band is the real battleground

GBP/USD is trading just above 1.36, oscillating around 1.3640–1.3635 after repeated failures to hold above the 1.37–1.3760 zone. The structure still shows higher highs and higher lows, but the latest advance stalled right under a descending trendline and a Fibonacci cluster near 1.3690–1.3700, which is now the key ceiling. On the downside, the market continues to respect a support pocket between 1.3500 and 1.3565, an area that previously acted as a cap and has flipped into a floor. Below that, the next meaningful reference sits around the 200-day area close to 1.3400. As long as spot trades above 1.35, the medium-term bias stays constructive, but repeated rejection near 1.37–1.38 shows buyers are losing conviction at the top of the range.

US side – DXY stuck near 96.97 despite CPI sliding to 2.4%

On the dollar side, the US Dollar Index (DXY) is hovering around 96.97, marginally higher on the day even after a clear cooling in inflation. Headline CPI slowed to 2.4% year-on-year, down from 2.7%, while the monthly print was 0.2% versus 0.3% expected. That profile reinforces the idea that the inflation shock is fading and keeps the conversation focused on when the Federal Reserve starts easing, not whether it tightens again. Rate markets now assign roughly a 90% probability that the Fed leaves policy unchanged in March, with speculation building that the first cut lands around June 2026. Technically, DXY is coiling inside a symmetrical triangle around the 0.382 Fibonacci level near 96.82, capped by the 50-day moving average close to 97.20 and the 200-day barrier around 97.60, while support sits at 96.34, then 96.00 and 95.55. The index is in a corrective, indecisive phase rather than a clean trend, and that hesitation on the dollar side is exactly what is propping GBP/USD up near the mid-1.36s.

UK macro – weak end to 2025, soft investment and reliance on this week’s data

On the UK side, the macro story is uninspiring. Data showed the economy finishing 2025 on a soft footing, with construction and business investment particularly weak. That mix confirms that domestic demand is fragile and helps explain why the pound has not been able to outperform other majors even while the dollar has come under pressure. The real drivers now are the releases due this week. The labour market numbers are expected to show the ILO unemployment rate holding around 5.1%, with average earnings including bonuses rising close to 4.6% year-on-year. Wage growth at that pace is still uncomfortable for the Bank of England, but the direction is what matters: any moderation would be taken as confirmation that domestic inflation pressure is ebbing. On top of that, the next CPI reading is projected at around –0.5% month-on-month and 3.0% year-on-year, lower than the previous print, which would strengthen the narrative that the disinflation trend is back on track and that the peak-rate phase is firmly over.

Bank of England – market already leaning toward March cut to 3.50%

The rates market has moved hard toward early easing from the BoE. A recent survey showed more than 60% of economists, 41 out of 63, expecting a 25-basis-point cut at the March 19 meeting, which would bring Bank Rate down to roughly 3.50%. Much of the weak GDP and sluggish industrial production is already reflected in the Bank’s forecasts, so this week’s wages and CPI releases are the real inflection points. If pay growth fades and headline inflation anchors near 3%, the case for cutting becomes difficult to resist. For GBP/USD, that means the pound is no longer offering a clean yield edge. The pair holding around 1.36 is less about BoE support and more about the fact that the US side is also drifting toward cuts, with CPI at 2.4% and Fed expectations softening in parallel.

Political layer – Starmer stability helps, but political risk still caps rallies

UK politics sits in the background as a latent risk. The recent tension around Keir Starmer’s choices, including the push to appoint Peter Mandelson as ambassador to the US, briefly raised questions about leadership stability before the party closed ranks. Strategists still treat sterling as vulnerable to bouts of weakness whenever Starmer’s position looks less secure, which means political noise can reappear quickly in risk-off periods. That does not drive every tick in GBP/USD, but it limits how far the pound can rally in the absence of a strong macro or rate-differential tailwind. The repeated failure in the 1.37–1.38 area fits that narrative: each attempt to trade higher meets a market ready to fade UK optimism.

GBP versus the rest – pound lagging high-beta currencies this month

Performance across the majors shows GBP trading like a middle-of-the-pack currency rather than a leader. The monthly heat map indicates that the pound has lost ground to high-beta currencies such as AUD and NZD, and has also slipped versus CHF, while only eking out relative stability against some other peers. That pattern says the resilience of GBP/USD is not about broad sterling demand; it is primarily a function of a softer dollar. Against the wider G10 complex the pound is not behaving like a strong currency. For GBP/USD, that reinforces the idea that the current environment is best described as range trading rather than a durable uptrend, with the cross reacting more to shifts in the DXY than to UK-specific positives.

Technical map – trend from 1.3035, moving averages, and key Fib levels

Technically, GBP/USD still respects a rising trendline from the 1.3035 low, with support converging around 1.3506–1.3518. Price trades above a three-line moving-average cluster, with the latest baseline near 1.3518 and the 200-day moving average around 1.3580–1.3600, depending on the exact feed. That alignment keeps the medium-term trend pointed higher, even as momentum cools. On the topside, the first serious barrier sits around 1.3690, where a 0.382 Fibonacci retracement and a descending trendline intersect. Above that, the market faces 1.3700, then 1.3790, and, if those levels give way, the January high near 1.3870. On the downside, immediate intraday support lies at 1.3579–1.3565, followed by the broader 1.3500 handle. A daily close below 1.3560 would increase downside risk toward 1.35, while a break of the trendline and a slide toward 1.34 would confirm a shift from consolidation into a deeper corrective phase. Candles around 1.36 have been shrinking, which is a classic signal of fading directional energy at the heart of the range.

Macro triggers ahead – UK CPI and wages vs US GDP, PCE and FOMC minutes

The data calendar over the coming days gives both sides of GBP/USD meaningful catalysts. In the UK, the focus falls on the labour market report on Tuesday, CPI on Wednesday, and PMIs on Friday. A combination of softer wages and a clean 3% inflation print would cement expectations for a BoE cut to 3.50% in March, sharpening downside pressure on the pound, particularly if PMIs confirm that growth momentum is fading. In the US, the market will parse Fed commentary, durable goods orders, housing numbers, the FOMC minutes, GDP, and the core PCE price index. After CPI at 2.4% year-on-year and 0.2% month-on-month, any further signs of cooling inflation will keep the Fed easing narrative alive. If that is matched by decent growth, the soft-landing story strengthens and the dollar remains capped. The path for GBP/USD hinges on the relative surprise: weak UK data against stable US numbers would favour a break below 1.36, while a dovish skew on both sides keeps the pair anchored inside a 1.35–1.38 corridor.

Trading map – how to position around 1.36 using clean levels

From a trading perspective, the respect for technical levels gives a clear framework. While GBP/USD holds above 1.3575–1.3580, short-term buyers have a defined support to lean on, targeting a push through 1.3690–1.3700. A sustained move above that band would reopen 1.3760 and then 1.3870, provided incoming data do not suddenly favour the dollar. On the other side, a daily close below 1.3570 would flag a loss of control by buyers and likely trigger a deeper move toward 1.3500–1.3510. Losing the 1.35 area and breaking the rising trendline from 1.3035 would shift focus toward 1.34 and potentially lower. The structure is that of a wide range with 1.35–1.37 as the key zone, and breaks out of that box will need genuine macro surprise rather than noise.

Verdict on GBP/USD – Hold with a mild topside bias while above 1.35

Combining US CPI at 2.4%, a DXY stuck just under 97, a UK economy that ended 2025 weak, markets positioning for a BoE move to 3.50%, and a chart that still holds above the 1.35 trendline, GBP/USD does not justify an aggressive directional stance at current levels. The stance is effectively a Hold with a modest bullish bias as long as spot stays above 1.35, treating 1.37–1.38 as a supply zone rather than a breakout area unless UK data improve decisively. A clean break and close above 1.3690–1.3700 would support a move toward 1.3760 and 1.3870, but the broader context argues against chasing upside late. A decisive daily close below 1.35 would flip the view to bearish, with downside risk toward 1.34 and possibly the mid-1.33s as markets fully price early BoE easing and any renewed UK-specific political or macro shock.

That's TradingNEWS