GBP/USD Price Forecast: Tests YTD low on dismal UK GDP; seems vulnerable ahead of US PCE

The GBP/USD pair attracts heavy selling during the first half of the European session on Friday and dives back closer to mid-1.3200s, or the year-to-date low touched last week, in reaction to the disappointing UK macro data. Figures from the UK Office for National Statistics (ONS) showed that the economy stagnated in January, compared to a 0.1% increase recorded in the previous month and market estimates for a 0.2% growth.

Other data showed that Industrial Production declined by 0.2% in January, while Manufacturing Production rose 0.1% during the reported month. The backward-looking data comes on top of heightened uncertainties over conflicts in the Middle East, which could have a ripple effect on economies around the world. This, in turn, weighs heavily on the British Pound (GBP), which, along with sustained US Dollar (USD) buying, exerts additional downward pressure on the GBP/USD pair.

Investors now seem worried that the recent surge in energy prices would rekindle inflation and force the US Federal Reserve (Fed) to delay cutting interest rates. The outlook remains supportive of elevated US Treasury bond yields and assists the USD to attract buyers for the fourth straight day. Furthermore, the global flight to safety benefits the safe-haven buck, pushing the USD Index (DXY), which tracks the Greenback against a basket of currencies, to its highest level since November 2025.

The global risk sentiment remains fragile amid a further escalation of geopolitical tensions in the Middle East and the risk of a prolonged US-Israel campaign against Iran. Meanwhile, Iran’s new supreme leader, Mojtaba Khamenei, warned during his first public statement that all US military bases in the region should be immediately closed or will be attacked. He further added that attacks against US bases in the region would continue, even though Iran believes in goodwill with its neighbors.

US President Donald Trump, on the other hand, said that stopping the evil empire in Iran was of greater importance to him than Oil prices. Adding to this, supply disruption fears due to the closure of the Strait of Hormuz keep Crude Oil prices near the $100 psychological mark. This might continue to benefit the Greenback, suggesting that the path of least resistance for the GBP/USD pair is to the downside. Traders now look forward to the crucial US inflation data for a fresh impetus.

The US Personal Consumption Expenditure (PCE) Price Index – the Fed's preferred inflation gauge – is due for release later during the North American session. Friday's US economic docket also features Durable Goods Orders, JOLTS Job Openings, and the Preliminary Michigan Consumer Sentiment and Inflation Index. The immediate market reaction to the data is more likely to be short-lived as the market focus remains glued to geopolitical developments, which favors the USD bulls.

GBP/USD 4-hour chart

Technical Analysis:

The recent repeated failures near the 200-period Exponential Moving Average (EMA) on the 4-hour chart and the subsequent fall underscore a downside bias within a broader corrective phase. The Moving Average Convergence Divergence (MACD) indicator slips deeper into negative territory with the line below its signal and a mildly expanding negative histogram, signalling strengthening selling pressure.

The Relative Strength Index near 32 stays below the 50 midline and approaches oversold territory, aligning with persistent downward momentum even as the risk of a corrective bounce increases. Any attempted recovery, however, might confront initial resistance at the 1.3350 area, where recent intraday highs converge with the first meaningful recovery pivot. A break above this zone would open the way toward 1.3420 and then the 1.3480 region closer to the 200-period EMA.

On the downside, immediate support is located around 1.3230, guarding the path toward the 1.3180 level as the next bearish target if sellers extend control. A sustained hold below 1.3350 keeps rallies capped and preserves the short-term bearish structure on the 4-hour chart, as reflected by the EMA.

(The technical analysis of this story was written with the help of an AI tool.)