GBP/USD Weekly Forecast: Pound struggles at 1.3700 ahead of key UK CPI and employment reports
- Pound Sterling faced rejection at 1.3700 against US Dollar, but buyers refused to give up.
- GBP/USD’s next big move hinges on the UK employment and inflation data.
- Technically, GBP/USD challenged key 61.8% Fibo support, RSI stays neutral - what’s next?
The Pound Sterling (GBP) failed to resist at higher levels against the US Dollar (USD), but buyers held their ground amid a US data-busy blockbuster week.
Pound Sterling showed resilience
GBP/USD managed to build on its late last week’s rebound from ten-day lows of 1.3509 in the first half of the week before running into strong offers at around the 1.3700 region.
Renewed weakness in the USD helped the pair scale a five-day peak near 1.3710, as the continued USD/JPY downside outweighed a positive surprise in the January Nonfarm Payrolls (NFP) report from the United States (US).
The Greenback reeled from the ‘rub-off’ effect of the relentless Japanese Yen (JPY) buying, fueled by Japan’s Prime Minister (PM) Sanae Takaichi’s landslide victory in the snap elections and looming forex intervention risks.
Additionally, increased dovish expectations surrounding the US Federal Reserve (Fed) interest rate cut outlook exerted downward pressure on the buck, aiding the pair’s rebound.
However, unexpectedly strong US labor data released on Wednesday helped the USD cut its losses, prompting a decent pullback in GBP/USD toward the 1.3600 demand area.
US Nonfarm Payrolls (NFP) in January increased by 130,000, much higher than the estimated figure of 70,000. The Unemployment Rate unexpectedly ticked down to 4.3% from 4.4% in December 2025.
The blockbuster jobs data almost priced out a March Fed rate cut, while slightly scaling back the odds for a June rate reduction, according to the CME Group’s FedWatch Tool.
Further, the Pound Sterling faced headwinds from renewed UK economic concerns after data published by the Office for National Statistics (ONS) showed on Thursday that Gross Domestic Product (GDP) rose by a meagre 0.1% in the fourth quarter of 2025, undermining the estimated 0.2% growth.
This, combined with the simmering UK political tensions, supported GBP/USD sellers in the latter part of the week.
British PM Keir Starmer's position seemed to be on shaky ground after disclosures linked to the Epstein files triggered intense criticism of Starmer’s appointment of Peter Mandelson as the UK’s ambassador to the US, prompting senior resignations and fuelling speculation about the PM’s political survival.
On Friday, the US Bureau of Labor Statistics announced that annual inflation in the US, as measured by the change in the Consumer Price Index (CPI), declined to 2.4% in January from 2.7% in December. This print came in below the market expectation of 2.5% and limited the USD's gains heading into the weekend, allowing GBP/USD to stabilize above 1.3600.
Week ahead: UK jobs and inflation on tap
After the delayed data deluge from the US, it’s time for the UK fundamentals to garner attention in a holiday-shortened week.
The US markets are closed on Monday in observance of Presidents' Day. Also, Chinese traders will be away the entire week, celebrating the Lunar New Year.
Therefore, thin trading conditions are likely to persist in the early part of the week, which could exaggerate GBP/USD moves.
Tuesday will feature the UK employment data, while the US calendar remains data-light that day.
The British CPI inflation data will ramp up volatility on Wednesday ahead of the Minutes of the Fed’s January monetary policy meeting due later in the day. A couple of mid-tier data, including the Durable Goods Orders and Housing Starts, will also be published on Wednesday.
The UK CPI report could reaffirm expectations of a March rate cut by the Bank of England (BoE), significantly impacting the Pound Sterling’s valuation.
On Thursday, the usual weekly US Jobless Claims will be reported, followed by the Pending Home Sales report.
Friday sees a busy end to the week, with a raft of preliminary Manufacturing and Services PMI data on the cards from both sides of the Atlantic.
However, the advance estimate of the fourth-quarter US GDP will steal the limelight alongside the publication of the Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge.
Besides, speeches from the Fed and BoE officials will also be closely followed amid hopes for a second round of talks between the US and Iran as negotiations intensify over curbing the latter’s nuclear weapons programme.
GBP/USD Technical Analysis
The 21- and 50-day Simple Moving Averages (SMA) advance, with the 21-day above the 50-day, while price holds above the 50-, 100- and 200-day SMAs. The 100-day SMA rises but remains beneath the 200-day, suggesting a steady medium-term improvement. The Relative Strength Index (RSI) stands at 53, neutral, and edging higher, reinforcing a balanced bullish tone.
Measured from the 1.3346 low to the 1.3868 high, the 50% retracement at 1.3607 offers nearby support, with the 61.8% retracement at 1.3545 as a deeper floor. A firm hold above the 21-day SMA at 1.3618 would keep the bias tilted upward, whereas a close below 1.3545 would dent momentum and shift risk back into consolidation.
(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.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
