GBP/USD is currently at 1.3337 on Thursday, reflecting a decrease of 0.25%, remaining close to three-month lows within a descending channel that has limited every rally since the 1.3869 swing high. Two forces are acting concurrently on sterling: geopolitical safe-haven demand pushing the DXY to 98.90-99.00 for a third straight day, and U.S. economic data exceeding expectations just when the GBP requires dollar weakness to gain some relief. The week-to-date performance table illustrates the situation — GBP has decreased by 0.67% against the USD, declined by 0.92% against the euro, and is only outperforming the Swiss franc, which has seen a 1.17% increase. Defeating the CHF does not indicate a positive outlook in this context. Seven days ago, the market indicated a 75% likelihood of a BoE rate cut in March.
As of Thursday, that figure has decreased to 20%. The energy shock from the Iran conflict has led to a stagflation situation in which the Bank of England faces a dilemma: it cannot lower rates without the risk of inflation picking up again, nor can it stimulate the economy without compromising its core objectives. The OBR has revised the UK 2026 GDP growth forecast down from 1.4% to 1.1%. A central bank caught in the midst of escalating energy-induced inflation and a slowing economy — alongside a ruling Labour Party that recently faced defeat in the Manchester local elections — is not an attractive investment. Initial Jobless Claims at 213K were reported below the anticipated 215K estimate. In February, corporate layoffs totaled 48.3K, reflecting a 55% decrease from January — the clearest indication of labor market stabilization observed this week. Services PMI reached 56.1, surpassing the consensus of 53.5. Productivity at 2.8% exceeded the forecast of 1.8%. Richmond Fed President Barkin introduced more assertive language on Thursday, indicating that the inflation data brings into question whether the Fed’s efforts are complete. The likelihood of a rate cut in June has decreased to 34%, compared to 46% from the previous week. The total easing anticipated from the Fed in 2026 is currently set at merely 40 basis points.
Friday’s NFP — consensus 59K jobs, 4.3% unemployment — represents the upcoming pivotal moment for GBP/USD. An increase above 80K drives DXY past 99.18, resulting in GBP dropping below 1.3300. A notable shortfall is the sole immediate driver for a robust rebound. The H4 chart indicates a range-bound movement between 1.3326 and 1.3393, with the MACD signal line positioned below zero and trending decisively downward. A drop beneath the range aims for 1.3131 initially, followed by 1.2971 if the descending channel completes its course. On H1, the Stochastic is positioned below 50 and trending downward, with a wave structure already in motion targeting 1.3266 — and 1.3125 if 1.3266 does not hold. The daily chart shows GBP/USD positioned beneath the complete SMA cluster converging around 1.3500, which currently serves as dynamic resistance. The descending trendline from 1.3869 limits each upward movement. A negative RSI divergence is emerging across various timeframes — a technical signal indicating that any move toward 1.3400 is likely to draw in sellers rather than buyers.
GBP/USD presents a selling opportunity on any rebound towards 1.3400-1.3430. The descending channel remains unchanged, with DXY maintaining its position at 98.90 backed by solid fundamental support. The BoE finds itself cornered in a stagflation scenario, and the only relevant domestic figure for the UK — a 1.1% GDP growth — provides no incentive for investment. The only scenario for reversal is a confirmed de-escalation between Iran and the U.S., which would unwind safe-haven dollar flows and drive the DXY below 98.37. That does not reflect Thursday’s situation. Cease: daily close exceeding 1.3500. Initial aim: 1.3131, further aim 1.2971.