GBP/USD Price Forecast: UK politics and BoE easing bets favor bears, US PPI in focus

The GBP/USD pair oscillates in a narrow band around the 1.3500 psychological mark through the first half of the European session on Friday and remains close to the weekly low, touched the previous day. The domestic political drama, along with the Bank of England (BoE) easing expectations, undermines the British Pound (GBP). Moreover, the US Federal Reserve's (Fed) hawkish outlook acts as a tailwind for the USD and caps the currency pair.

The Green Party pulled off a landmark victory and snatched the formerly safe seat of Gorton and Denton away from Labour. The outcome is seen as a major blow to the UK Prime Minister Keir Starmer’s ailing authority and will spark further questions over his leadership of the party. Moreover, the Greens’ first-ever win in a parliamentary by-election underscores the breakdown of Britain’s decades-old two-party politics, fueling uncertainty and undermining the GBP amid the growing acceptance of a BoE interest rate cut in May.

In fact, BoE Governor Andrew Bailey said during his testimony before the Parliament’s Treasury Committee earlier this week that there is scope for interest rate cuts amid expectations that inflation will return to the 2% target. In contrast, traders trimmed their bets for more aggressive policy easing by the US Federal Reserve (Fed) after the January FOMC minutes showed that the central bank is in no hurry to cut interest rates further. Moreover, officials discussed the possibility of raising rates if inflation does not cool.

The Fed's relatively hawkish outlook keeps the USD close to the monthly swing high, touched last week. However, growing concerns about the potential economic fallout from US President Donald Trump's erratic trade policies hold back the USD bulls from placing fresh bets and act as a tailwind for the GBP/USD pair. The market focus now shifts to the US Producer Price Index (PPI). This, along with comments from influential FOMC members, could drive the USD and provide short-term impetus to the GBP/USD pair.

GBP/USD 4-hour chart

Technical Analysis:

The near-term bias is mildly bearish as the GBP/USD pair holds below the 200-period Simple Moving Average (SMA) support breakpoint on the 4-hour chart, near 1.3572, keeping the broader tone heavy despite the recent stabilization above 1.3485. The Relative Strength Index (RSI) around 45 stays below the 50 midline, hinting at prevailing but moderate selling pressure rather than oversold conditions. The Moving Average Convergence Divergence (MACD) line has slipped marginally below its Signal line around the zero level, with a flat histogram that reinforces a weak downside bias within a consolidative environment.

Initial support emerges at 1.3485, the latest reaction floor, followed by 1.3475 and then 1.3450 if bears extend control. On the upside, immediate resistance stands at 1.3520, with a break above exposing 1.3550 ahead of the 1.3570/1.3580 area, where the 200-period SMA aligns with prior price congestion to form a stronger resistance zone. A sustained move above 1.3580 would be needed to challenge the current bearish bias, while holding below 1.3520 keeps the risk skewed toward a deeper pullback within the recent range.

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