GBP/USD Price Forecast: BoE Cut Bets and Starmer Turmoil Pull Pound Back From 1.3870

GBP/USD – Repricing BoE cuts against a softer Fed and rising UK risk

GBP/USD – Spot price, recent range and key technical zones

GBP/USD trades around 1.36, with a recent intraday band roughly 1.3508–1.3625 and a rejection from the 1.3870 high, the strongest level since late 2021. The 1.3550–1.3570 pocket now acts as primary short-term support; a daily close below it exposes 1.3500 first and then the 1.3460 area around the 50-day moving average. On the topside, supply is concentrated near 1.37–1.3720, where rallies have been consistently sold since the BoE decision.

GBP/USD – BoE holds at 3.75% but the vote split screams “cuts coming”

The Bank of England left Bank Rate at 3.75%, but the Monetary Policy Committee split 5–4, with four members already voting for a cut to 3.50%. That narrow margin makes it clear policy is one or two meetings away from the first reduction, not “higher for longer”. After the decision, markets moved from roughly 35 bps of easing priced for 2026 to around 50 bps, immediately cheapening the pound and pushing GBP/USD down through 1.36 toward 1.3550.

GBP/USD – Inflation still above target, labour data weakening and BoE cover to ease

Headline UK inflation remains above the 2% target, but December data confirmed a downtrend rather than any renewed spike, which gives the BoE room to discuss cuts. The labour market is the clearest drag: unemployment sits near a four-year high around 5.1%, employment dropped by about 43,000 in December and wage growth is rolling over. With core activity soft and private-sector growth subdued, a 3.75% policy rate is clearly restrictive, so expectations for at least two 25 bps cuts over the next 12 months are consistent with the data and negative for GBP/USD on any UK-centric day.

GBP/USD – Fed path, US data and why the dollar can support but not crush the pair

On the US side, the dollar got a lift when President Trump nominated Kevin Warsh as the next Fed Chair, tilting expectations away from an aggressively dovish stance. At the same time, incoming data is cooling: ADP private payrolls fell to about 22,000 in January, well below the 150,000+ prints seen in stronger quarters; job openings are trending lower and initial jobless claims have pushed into the mid-200,000s. The market still prices roughly two Fed cuts in 2026, so the dollar can rally on risk-off or hawkish headlines, but it is not set up for a sustained bull run, which limits how far GBP/USD can fall without fresh US upside surprises.

GBP/USD – Starmer leadership noise, fiscal uncertainty and the political risk premium

Political risk has become an extra headwind for sterling just as BoE expectations turn dovish. Leadership speculation around Prime Minister Starmer, driven by the controversy around Peter Mandelson’s US ambassador nomination and his Epstein links, has raised questions over the stability of the current team. Any threat to Chancellor Reeves or to the fiscal framework forces investors to demand a premium to hold UK assets, which mechanically weighs on the pound and helped push GBP/USD to 10-day lows below 1.3550 after the BoE meeting.

GBP/USD – From 1.3870 breakout failure to 1.3550 stress test

The rejection of 1.3870 confirmed that buyers are no longer prepared to pay new highs without evidence the BoE will stay tighter than the Fed. Once the 5–4 BoE vote exposed how close the committee is to cuts, stretched long-sterling positions started to unwind and GBP/USD slid sharply from the high-1.37s to just under 1.3550. That 1.3550 print is now a key pivot: as long as it holds, the market treats the move as a corrective pullback inside a broader 1.35–1.39 range; a clean break below 1.3500 would turn the focus toward 1.3460 first and then 1.3330–1.3350 as the next downside magnets.

GBP/USD – Trading map: levels that matter and what breaks the current band

The tactical map for GBP/USD is straightforward: 1.3720–1.3870 is the sell zone, 1.3550–1.3500 is the defence line for dip-buyers. Rallies into 1.37–1.3720 are being used to re-establish shorts with stop-losses above 1.3820 and profit targets initially around 1.3500 and then near 1.3460. To flip the bias, the pound would need either a clear push-back from the BoE against early cuts or a decisive US data miss that forces the market to price Fed easing ahead of the BoE; without one of those catalysts, the path of least resistance is to test the lower half of the current range rather than to break and hold above 1.3870.

GBP/USD – Stance: sell strength while BoE cuts approach and US data drifts softer

Putting it together, you have a BoE at 3.75% with four members already voting for 3.50%, a labour market cooling with unemployment around 5.1% and employment down 43,000, markets pricing more easing in the UK than in the US, and political noise around Starmer that adds a risk premium to sterling. On the other side, the dollar is supported by cautious Fed messaging but capped by weaker jobs data and rising odds of 2026 cuts, which argues against an uncontrolled USD spike. In that configuration the clean call is tactical Sell-on-rallies in GBP/USD while it trades below 1.3720, targeting 1.3500–1.3460 on the downside, with a medium-term view that the pair stays range-bound but biased lower until either the BoE re-anchors expectations or US data deteriorates enough to drag the dollar down across the board.

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