British Pound consolidates around 1.3600 vs. USD; looks to US CPI for fresh impetus

GBP/USD struggles to gain any meaningful traction as traders await the key US inflation data.
Fed rate cut bets and threats to the Fed’s independence keep the USD bulls on the defensive.
Easing political jitters counter dovish BoE bets, lending support to the GBP and spot prices.

Haresh Menghani FXStreet

The GBP/USD pair remains on the defensive through the Asian session on Friday, though it lacks bearish conviction and holds above the 1.3600 mark as traders await the release of the US consumer inflation figures before placing directional bets.

The crucial US Consumer Price Index (CPI) report will play a key role in influencing market expectations about the US Federal Reserve's (Fed) rate-cut path. This, in turn, will drive the US Dollar (USD) demand and provide some meaningful impetus to the GBP/USD pair. Ahead of the key data risk, the markets are pricing in a greater chance that the US central bank will cut interest rates at least two times in 2026, which keeps the USD bulls on the defensive.

Apart from this, growing concerns about the Fed's independence fails to assist the USD to build on the blowout US Nonfarm Payrolls (NFP) report-inspired bounce from a two-week low, touched on Wednesday. However, the risk-off impulse offers some support to the safe-haven Greenback and acts as a headwind for the GBP/USD pair. Adding to this, dovish Bank of England (BoE) expectations contribute to capping the upside for the British Pound (GBP).

In fact, the odds of a 25 basis points (bps) BoE rate cut as soon as March increased following the release of mostly disappointing UK macro data on Thursday. In fact, the preliminary report published by the Office for National Statistics showed that the UK economy expanded by 0.1% in the October-to-December period, matching the slow pace recorded in the third quarter. The reading also fell short of the BoE's forecast of 0.2% growth, backing the case for further easing.

Meanwhile, UK Prime Minister Keir Starmer received backing from his cabinet and Labour MPs following a tumultuous period sparked by fallout from the Jeffrey Epstein files and the resignation of a key aide. This helped prevent an immediate leadership challenge, easing UK political jitters. This, in turn, is seen acting as a tailwind for the Sterling and the GBP/USD pair, warranting some caution before positioning for any meaningful depreciating move.

Pound Sterling FAQs

What is the Pound Sterling?

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).

How do the decisions of the Bank of England impact on the Pound Sterling?

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.

How does economic data influence the value of the Pound?

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.

How does the Trade Balance impact the Pound?

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.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

EUR/USD climbs to daily highs near 1.1820

EUR/USD now picks up pace and advances to the area of daily peaks north of the 1.1800 barrier at the end of the week. The pair’s decent move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the mild offered stance in the US Dollar.

GBP/USD trims losses, retests 1.3460

After briefly challenging its key 200-day SMA near 1.3440, GBP/USD now manages to regain some balance and revisit the 1.3460 zone on Friday. Cable’s pullback comes as the selling pressure on the Greenback gathers traction, reigniting some recovery in the risk-linked space.

Gold flirts with four-week highs past $5,200

Gold extends its rebound, climbing for a third consecutive session and pushing back above the $5,200 mark per troy ounce on Friday. The move higher continues to draw support from lingering geopolitical tensions and the ongoing uncertainty surrounding US trade policy, both of which are keeping safe-haven demand firmly in play.

Bitcoin, Ethereum and Ripple consolidate with short-term cautious bullish bias

Bitcoin, Ethereum and Ripple are consolidating near key technical areas on Friday, showing mild signs of stabilization after recent volatility. BTC holds above $67,000 despite mild losses so far this week, while ETH hovers around $2,000 after a rejection near its upper consolidation boundary.

Changing the game: International implications of recent tariff developments

The Supreme Court ruling on International Emergency Economic Powers Act (IEEPA) tariffs provides limited relief for the rest of the world, with weighted average tariff rates modestly lower.

Starknet unveils strkBTC, shielded Bitcoin transactions on Ethereum Layer 2

Starknet, the Ethereum Layer 2 network developed by StarkWare, today announced strkBTC, a wrapped Bitcoin asset that introduces optional shielding while preserving full DeFi composability.