GBP/USD. Analysis and forecasting

[Ben Graham]

On Thursday, the GBP/USD pair stalled near the psychological level of 1.3600 while attempting to recover. However, the UK economic data came out very weak, giving the British pound little chance to demonstrate strength.

The UK Office for National Statistics reported that the economy expanded by 0.1% in the three months to December 2025, below analysts' expectations of 0.2%.

At the same time, in the fourth quarter of 2025, the UK GDP increased by 1.3% year-on-year, compared to the forecast of 1.2%. It is also worth highlighting that industrial production, manufacturing output, and the trade balance all disappointed the market. This comes amid expectations of a Bank of England rate cut in March, which is putting pressure on the British pound sterling and keeping it at lower levels.

On the other hand, traders have scaled back expectations of a Federal Reserve rate cut in March following Wednesday's strong U.S. Nonfarm Payrolls (NFP) report.

Additionally, hawkish comments from two influential FOMC members supported the U.S. dollar, which rebounded overnight from nearly a two-week low, creating additional headwinds for the pair's growth—though only temporarily. Nevertheless, market participants still price in at least two 25-basis-point Fed rate cuts during 2026.

Moreover, concerns about the independence of the U.S. central bank, along with the overall bullish market sentiment, are limiting significant gains in the dollar as a safe-haven asset.

Today, to identify better trading opportunities, attention should be paid to the release of U.S. initial jobless claims data, which may provide short-term opportunities in the second half of the North American session. However, the key focus should remain on fresh U.S. consumer inflation data scheduled for Friday. These critically important indicators will significantly influence expectations regarding the Fed's rate-cut trajectory, potentially boosting demand for the U.S. dollar in the near term and setting a new directional move for the GBP/USD pair.

From a technical perspective, the pair is attempting to break above the 9-day EMA while remaining above the 20-day SMA, showing resilience below the psychological 1.3600 level. Oscillators on the daily chart remain positive, though it is worth noting that the MACD histogram is fading, indicating weakening upward momentum.

Nevertheless, if GBP/USD manages to break above the 9-day EMA and the 1.3600 level, it could gain the potential to reach the psychological 1.3700 mark. If the pair fails to hold above 1.3600, it may accelerate its decline toward the February low.

The material has been provided by InstaForex Company - www.instaforex.com