GBP/USD slides below 1.3300 ahead of Thursday's BoE decision
- The Pound Sterling tussled with the 200-day EMA and fell as Fed hawkishness collides with Bank of England uncertainty.
- The Fed held rates and raised its 2026 core inflation forecast to 2.7%; Chair Powell said progress on inflation has been slower than hoped.
- The BoE announces its rate decision on Thursday, with markets now expecting a hold after the Middle East oil shock reshaped the inflation outlook.
GBP/USD fell around 0.7% on Wednesday, sliding below the 1.3300 handle as Cable continues to grapple with the technical level. The sell-off extends the pullback from the late-January high near 1.3870, with the pair now trading below both of its key daily moving averages. Wednesday's decisive bearish candle suggests the indecisive price action of the past two weeks has resolved to the downside.
The Federal Reserve (Fed) held rates at 3.50% to 3.75% and stuck with its projection of one cut in 2026, but Chair Jerome Powell's press conference pushed the US Dollar higher across the board. Powell noted that inflation progress has been slower than the central bank had hoped, while the updated Summary of Economic Projections raised the 2026 core inflation forecast to 2.7% from 2.5% in December. Wednesday's Producer Price Index (PPI) reinforced the hawkish tone, with headline PPI jumping 0.7% month-on-month (MoM) against a 0.3% consensus.
All eyes now turn to the Bank of England's (BoE) rate decision on Thursday. Markets had been pricing a roughly even chance of a cut heading into March, but the Middle East oil shock has all but ruled that out; the consensus expectation is now a hold at 3.75%. The February vote was a narrow 5-4 to hold, and the split this time will be closely watched for signs of how the Committee is weighing the UK's worsening growth picture against the renewed inflation threat. UK unemployment has risen to a five-year high of 5.2%, yet services inflation printed 4.4% in January, well above the BoE's forecast. Governor Andrew Bailey has described the March decision as a "genuinely open question," but rising energy costs have significantly narrowed the window for easing.
Technical Analysis
In the daily chart, GBP/USD trades at 1.3265. The near-term bias is mildly bearish as spot holds below the declining 50-day EMA around 1.35 while still hovering close to the flatter 200-day EMA near 1.34, signaling a fading medium-term uptrend and growing downside pressure. The recent sequence of lower daily closes from the mid-1.36s into the low-1.33s confirms sellers’ control, with rallies capped before challenging the 50-day average. The Stochastic has rolled over from mid-range and is sliding toward oversold territory, indicating momentum remains aligned with the downside but without the exhaustion typical of a completed sell-off.
Immediate resistance emerges at the 1.3350 area, near the latest cluster of failed bounces and just beneath the 200-day EMA, with a break above this region needed to ease downside pressure and open the way toward 1.3450, followed by the stronger barrier at 1.3500 around the 50-day EMA. On the downside, initial support aligns with the recent low near 1.3220, guarding the path toward 1.3150 as the next bearish objective if momentum persists. A daily close below 1.3220 would confirm continuation of the short-term downtrend, while holding above it would keep price trapped in a broader consolidation around the longer-term average.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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