GBP/USD Price Analysis: Pound falls as Middle East war continues to escalate

Rising inflation driven by Oil prices complicates expectations for near-term BoE interest rate cut.
GBP/USD drops toward 1.3350 as the US-Iran conflict keeps escalating.
Reuters poll shows 86% of economists expect BoE to hold rates at 3.75% at March meeting.

Agustin Wazne FXStreet

The GBP/USD pair is trading near the 1.3350 level, losing ground for the third consecutive day amid intensifying tensions in the Middle East. On Wednesday, the International Energy Agency (IEA) agreed to release around 400 million barrels of Oil from member countries’ strategic reserves to tame energy prices.

Markets were increasingly confident that the Bank of England (BoE) would cut interest rates at next week’s monetary policy meeting. However, inflationary pressure from higher Oil prices have clouded the policy outlook, prompting expectations from policymakers to remain cautious and potentially delay rate cuts.

Additionally, according to a Reuters poll, the BoE is expected to hold the interest rate at 3.75% on March 19, with 43 of 50 economists, or 86%, expecting a hold (vs 35% for a hold in the February poll).

In the United States (US), macroeconomic data were better than anticipated. The US Goods and Services Trade Balance posted a $54.5 billion deficit in January, better than the $72.9 billion deficit in December. Initial Jobless Claims for the week ended March 7 declined to 213K from a revised 214K in the previous week, beating expectations of 215K.

Short-term technical analysis

On the 1-hour chart, GBP/USD trades at 1.3345. The near-term bias is mildly bearish as spot holds below the 20-period Simple Moving Average (SMA) at 1.3381 and the 100-period SMA at 1.3396, keeping the pair under layered dynamic resistance. The short-term SMA is edging down toward the longer one, reinforcing selling pressure after repeated failures to sustain above the 1.34 handle. The Relative Strength Index (RSI) indicator at 34 leans lower, which signals building bearish momentum but also warns that further downside extension would need fresh selling interest.

In the 4-hour chart, GBP/USD is mildly bearish as the pair holds below both the 20-period and 100-period SMAs, with the shorter average capped beneath the longer and price extending the rejection from the 1.34 region. The downward-sloping 100-period SMA around 1.3438 reinforces the broader corrective tone, while the 20-period SMA near 1.3412 tracks closer to price, limiting recovery attempts. The Relative Strength Index (RSI) retreats toward the low 40s, indicating fading bullish momentum and keeping sellers in control on intraday rallies.

Immediate resistance is seen at 1.3370, where a horizontal barrier converges with recent price congestion, followed by 1.3409, which aligns with the descending short-term average cluster and the latest swing failure zone. On the downside, initial support stands at 1.3339, guarding the recent base of the range; a clear break below this area would open the way toward the mid-1.32s as the next bearish objective. A sustained move back above 1.3409 would be needed to negate the current downside bias and signal a more durable recovery phase.

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

Author

Agustin Wazne

FXStreet

Agustin Wazne joined FXStreet as a Junior News Editor, focusing on Commodities and covering Majors.

AUD/USD gains traction near 0.7100 as the post-Fed USD rally pauses

AUD/USD finds fresh buyers and retakes 0.7100 in the Asian session on Thursday as the US Dollar pauses its hawkish Fed-inspired rally to its highest level since late July. However, RBA rate-hike bets and hopes for US-Iran diplomatic efforts lift risk sentiment and support the risk-sensitive Australian Dollar and the major.

USD/JPY reverses a dip below 156.00 as focus shifts to BoJ

USD/JPY is reversing a brief dip below 156.00 in the Asian session on Thursday, looking to snap a three-day winning streak to a nearly two-week top set the previous day. The US Dollar pauses following the post-Fed rally to seven-week highs, while a more hawkish repricing of the BoJ's policy normalization path supports the Japanese Yen. This keeps the pair's upside limited, with the focus now shifting to the BoJ policy decision due on Friday.

Gold: Upside appears capped by $4,400

Gold climbs sharply and clinches fresh weekly peaks on Thursday, although the bull run seems to have met some initial hurdle around the $4,400 zone per troy ounce. The yellow metal’s rebound reverses three daily declines in a row and follows the modest retracement in the US Dollar as well as another negative performance of crude oil prices.

BoE recap: A cautious stance amid rising inflation risks

The Bank of England left Bank Rate unchanged at 3.75% but delivered a distinctly hawkish message as its inflation outlook deteriorated sharply.

One hike down, more to come? The Fed’s new rate path says yes

The Federal Reserve (Fed) raised its Fed Fund Target Range (FFTR) range by 25 basis points to 3.75%-4.00% in a unanimous decision, saying the move would support a timelier return to its 2% inflation goal.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.