GBP/USD Weekly Forecast: Pound Sterling braces for more pain, as 200-day SMA tested

The Pound Sterling (GBP) crashed to its lowest level in a month against the US Dollar (USD), as critical support levels were breached in a data-packed week.

Pound Sterling crumbled into USD’s dominance

GBP/USD broke the previous week’s consolidation to the downside, as sellers returned with pomp, smashing the major back toward the levels last seen in late January.

The pair tested bids below the 1.3450 barrier as the US Dollar strength largely played out throughout the week, while the Pound Sterling stepped back on expectations of divergent monetary policy outlooks between the Bank of England (BoE) and the US Federal Reserve (Fed).

The UK jobs and inflation data both endorsed a BoE interest rate cut next month, bolstering market expectations for such a move.

Data published by the Office for National Statistics (ONS) showed on Tuesday that the UK's Unemployment Rate hit a near five-year high of 5.2% in the last three months of 2025. Average pay also grew by 4.2%, down from a revised 4.4% in the three months to November.

On Wednesday, the UK Consumer Price Index (CPI) inflation cooled to 3% in January, down from 3.4% in the twelve months to December. The data aligned with market expectations. Meanwhile, core inflation, excluding energy, food, alcohol, and tobacco, stood at 3.1% in January, slowing from 3.2% in December.

Across the Atlantic, even though markets continued to price in three 25-basis-point (bps) rate cuts this year, the January Fed Minutes and US economic data backed a case for a higher-for-longer rate view.

The Minutes suggested that the Fed remains in no rush to cut interest rates, with several policymakers open to rate hikes if inflation remains elevated while others are inclined to support further cuts if inflation recedes.

The US Treasury Department data showed on Wednesday a net inflow of $44.9 billion in Treasury International Capital (TIC) for December 2025, implying increased foreign appetite for US assets.

Further, the US Initial Jobless Claims declined by 23,000 to 206,000 in the week ended February 14. The data fell by the most since November, adding to evidence of stabilization in the US labor market.

Besides the upbeat US statistics, renewed geopolitical tensions between the US and Iran, as well as between Russia and Ukraine sagged investors’ confidence, reviving the haven demand for the Greenback at the expense of the high-beta currency – the Pound Sterling.

Two days of peace talks in Geneva between Ukraine and Russia ended without a breakthrough. Ukraine’s President Volodymyr Zelenskiy said he was dissatisfied with the outcome.

After CBS News reported on Wednesday that a potential US military strike on Iran could come as early as Saturday, Trump warned late Thursday that Iran must make a deal, or “bad things will happen," with the threat of military strikes still hanging heavy over delicate nuclear negotiations, BBC News reported. Iran threatened a decisive response if attacked.

The currency pair consolidated the weekly losses on Friday, awaiting a raft of high-impact data from the US. 

British Retail Sales rose by 1.8% on a monthly basis in January, the ONS reported on Friday, smashing expectations for a 0.2% rise and marking the largest monthly rise since May 2024. On an annual basis, retail volumes jumped by 4.5%, much higher than the 2.8% forecast.

Meanwhile, “the S&P Global UK Composite Purchasing Managers' Index rose to 53.9 in a preliminary report for February from 53.7 in January, the highest level since April 2024,” per Reuters. 

The US Bureau of Economic Analysis’ (BEA) reported on Friday that the US’ Gross Domestic Product (GDP) expanded at an annual rate of 1.4% (first estimate) in the fourth quarter of 2025. This marked a significant slowdown from the 4.4% growth recorded in the previous quarter and came in below the market expectation of 3%.

Despite the disappointing GDP print, however, the USD stood resilient against its peers as the underlying details of the report highlighted sticky inflation, capping GBP/USD's recovery attempt. The core Personal Consumption Expenditures (PCE) Price Index rose by 0.4% in December, at a stronger pace than the market forecast and the November’s increase of 0.3% and 0.2%, respectively.

Week ahead: Eyes on geopolitics and US data

It’s a relatively quiet week after an action-packed one, providing some time for traders to assess the economic outlooks on both sides of the Atlantic.

Chinese traders will return after a week-long holiday, which could ramp up market volatility, while the geopolitical tensions between the US and Iran will remain in the spotlight.

The first relevant macro data will only be released on Thursday, the usual weekly Jobless Claims data from the United States (US).

On Friday, the US Producer Price Index (PPI) will grab some attention, wrapping a data-light week.

Despite the data-scarce week, speeches from the Fed and the BoE policymakers could partially fill in the void.

GBP/USD Technical Analysis

The Simple Moving Averages (SMA) advance in bullish alignment, with the 21- and 50-day above the 100- and 200-day, while price sits below the shorter SMAs yet holds over the longer ones. This setup points to a pullback within a broader upward bias, with the 200-day SMA near 1.3445 supporting the downside. The Relative Strength Index (RSI) at 42 remains below the 50 midline, signaling fading momentum. Measured from the 1.3346 low to the 1.3868 high, the 78.6% Fibonacci Retracement (Fibo) at 1.3458 offers nearby support.

A recovery would need a close back above the 61.8% Fibo retracement at 1.3545 to improve the tone, opening the path toward the 50% retracement at 1.3607, while the 21-day SMA around 1.3642 caps initial advances. Conversely, a break under the 78.6% retracement at 1.3458 would expose the 100-day SMA at 1.3393, where buyers would attempt to regroup.

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