The GBP/USD pair reverses an early European session dip to the 1.3600 mark touched in the aftermath of mostly disappointing UK macro data, though it lacks follow-through buying or bullish conviction. 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 Bank of England’s (BoE) forecast of 0.2% growth, pushing up the odds of a 25 basis points (bps) rate cut as soon as March.
The British Pound (GBP), however, largely shrugged off dovish BoE expectations amid easing UK political jitters. Following a tumultuous period sparked by fallout from the Jeffrey Epstein files and the resignation of a key aide, UK Prime Minister Keir Starmer received backing from his cabinet and Labour MPs, preventing an immediate leadership challenge. Although Starmer’s position remains damaged, the temporary stability turns out to be a key factor acting as a tailwind for the GBP/USD pair amid the lack of any meaningful US Dollar (USD) buying.
Traders trimmed their bets for another interest rate cut by the US Federal Reserve (Fed) in March in reaction to the blowout US monthly employment details, released on Wednesday. The popularly known Nonfarm Payrolls (NFP) report showed that the economy added 130K new jobs in January, up from the previous month’s revised print of 48K and beating expectations for a reading of 70K. Other details revealed that the Unemployment Rate edged lower to 4.3% from 4.4%, while Average Hourly Earnings held steady at 3.7%, compared to 3.6% expected.
Investors, however, are still pricing in the possibility of at least two 25 bps Fed rate cuts in 2026. Adding to this, threats to the US central bank’s independence, along with the underlying bullish sentiment, keep a lid on the attempted USD recovery from a nearly two-week low and lend additional support to the GBP/USD pair. The market focus now shifts to the latest US consumer inflation figures, due for release on Friday. The crucial data will influence expectations about the Fed’s rate-cut path, which, in turn, will drive the USD demand in the near term.
GBP/USD 1-hour chart
Technical Analysis:
The 100-hour Simple Moving Average (SMA) edges higher to 1.3642, while the GBP/USD pair holds marginally beneath it, acting as immediate resistance and capping rebounds. Spot prices lingering below this rising gauge keep a soft near-term tone. Moreover, the Moving Average Convergence Divergence (MACD) hovers around the zero line, with the MACD and Signal lines converged and the histogram minimal, reinforcing a neutral posture. The Relative Strength Index (RSI) stands at 47 (neutral), indicating subdued momentum.
That said, recovery prospects would improve on a sustained move above the 100-period SMA, backed by a MACD push into positive territory and an RSI break through 50. Failure to reclaim that dynamic barrier would keep rallies capped and maintain a sideways-to-soft bias until momentum strengthens.
(The technical analysis of this story was written with the help of an AI tool.)
