GBP/USD Price Forecast: Pound Clings to 1.3600 After Sharp Reversal From 1.3869

GBP/USD – medium-term bullish bias holding around 1.3600

GBP/USD spot zone, structure and key levels

GBP/USD is trading around 1.3600–1.3610 after retreating from the late-January peak near 1.3869, effectively unwinding close to 200 pips from the four-year high but without breaking the underlying uptrend. On the daily chart the pair still holds above the 100-day EMA, which keeps the medium-term structure pointed higher as long as the 1.3580–1.3600 band acts as a floor. Price trades above the middle Bollinger band, with the envelopes widening rather than contracting, signalling that volatility is expanding in the direction of the prior advance instead of forming a topping pattern. Daily RSI sits near 52, just above the 50 line, confirming a neutral-to-constructive stance instead of a momentum breakdown.

BoE at 3.75% and how the cut path is priced into GBP/USD

The Bank of England has kept Bank Rate at 3.75%, but the internal vote split has shifted in a way that supports a more dovish narrative. Fewer MPC members backed an unchanged stance than the seven the market expected, and that has encouraged pricing of a first rate cut as early as March. Current projections point toward a terminal level near 3.00% by mid-2027, implying roughly 75 bps of easing from the present level. That path is still restrictive enough to anchor UK inflation expectations around the 2% target, but it clearly reduces the policy-rate advantage that supported GBP/USD on the run up to 1.3869. Each additional signal that reinforces an early-cut scenario tends to cap rallies above 1.37–1.38 unless the dollar side weakens more aggressively.

UK political stress and its drag on GBP/USD upside

Domestic politics is adding a secondary risk premium into GBP/USD price action. The resignation of Morgan McSweeney as Downing Street Chief of Staff, after admitting responsibility for advising Prime Minister Keir Starmer on the controversial ambassador appointment, underlines fragility at the core of the government. That kind of event erodes confidence in the policy mix and in execution quality even if it does not immediately alter BoE decisions. The result is a softer ceiling on sterling: spikes into the 1.37–1.38 region are more likely to attract profit-taking while this type of headline flow persists. At the same time, the absence of a parallel blow-out in UK yields or credit spreads shows that the market is treating this as a political noise factor, not a systemic shock.

US Dollar Index near 97.4–97.6 and implications for GBP/USD

On the US side, the USD is not delivering a strong counter-trend impulse. The Dollar Index is operating around 97.3–97.6 with daily losses close to 0.13%, having been rejected near the 97.95–98.00 band where the upper channel boundary coincided with the 61.8% Fibonacci retracement. On the two-hour chart DXY now trades below its 50-EMA, while the 200-EMA is parked higher around 98.60, confirming a soft tone. The key pivot sits around 97.20, the Fibonacci midpoint and recent decision area; a decisive break below that level would open room toward 96.83 and 96.34 and reinforce the pressure on the dollar. RSI in the mid-40s indicates fading momentum rather than oversold conditions, which fits with a gradual drift lower instead of a collapse. For GBP/USD this means the dollar is providing only limited resistance to sterling strength and is unlikely to force an aggressive breakdown as long as DXY remains capped below 98.00.

US jobs, sentiment and Fed stance as the macro backdrop for GBP/USD

Macro data on the US side are keeping GBP/USD supported on dips. The delayed January US Nonfarm Payrolls release is expected to show around 70,000 new jobs with unemployment holding near 4.4%, pointing to a labour market that is cooling but still functioning. The Michigan Consumer Sentiment Index has climbed to a six-month high at 57.3, beating the 55.0 consensus and marking a third consecutive monthly gain, which indicates that consumer confidence is recovering. The Federal Reserve is widely expected to leave rates unchanged at the March meeting, acknowledging slow growth and some labour-market risk while emphasising that inflation remains above comfort. That mix leaves the USD without a dominant direction: cuts are not imminent enough to crush the dollar, but the absence of fresh hikes prevents a sustained DXY surge. For GBP/USD, the net effect is a macro backdrop where the dollar at 97.3–97.6 adds only modest downside pressure, allowing sterling to hold 1.36 while it digests the BoE’s shift.

Intraday GBP/USD structure: 1.3535–1.3580 base versus 1.3690–1.3870 topside

On the intraday horizon, GBP/USD is trying to carve out a base after the reversal from the 1.3850 region. The two-hour chart shows price orbiting 1.3590 with recent candles in the 1.3535–1.3580 area carrying small real bodies and long lower wicks, a sign that sellers are losing conviction as spot moves into support and that demand re-emerges below 1.36. That pocket aligns with the 61.8% Fibonacci retracement around 1.3578 and the 200-EMA on the intraday chart, turning it into a technical pivot. Above, the 50-EMA near 1.3635 acts as first resistance; a sustained move back above that average would be the first concrete signal that the corrective phase is running out of energy. The next upside checkpoints sit near 1.3690 and 1.3760, defined by previous reaction highs, ahead of the strong supply zone at 1.3850–1.3870 that corresponds with the upper Bollinger band on the daily chart. On the downside, a clean break under 1.3580 would raise the probability of a retest of 1.3535; a failure there would bring 1.3290 into view, where the lower daily Bollinger band and prior demand intersect. RSI in the low-40s on the two-hour chart supports the view of a correction within an uptrend rather than a fresh bearish impulse.

How BoE pricing, UK politics and DXY together shape GBP/USD

The interaction between UK policy expectations, domestic politics and the US dollar explains why GBP/USD is consolidating rather than trending. BoE guidance from 3.75% toward a likely 3.00% terminal rate by mid-2027 rationalises the drop from 1.3869, but that path is gradual enough to prevent sterling from losing its entire rate-differential advantage. UK political noise acts as a brake on rallies but has not yet triggered the kind of market reaction that would justify pricing a structural risk premium into the pound. Simultaneously, the Dollar Index stalling under 98.00 with a soft RSI profile means the greenback does not have the momentum to drive GBP/USD through successive support layers without help from a hard macro shock. That combination naturally channels flows into the 1.3535–1.3580 region: medium-horizon accounts see value in buying GBP near that base, while short-term dollar longs use dips in DXY toward 97.20 as an opportunity to take profits.

Bias and stance on GBP/USD: buy, sell or hold around 1.3600

Given the current setup, the stance on GBP/USD stays constructive. While spot trades above the 1.3535–1.3580 range and the Dollar Index remains contained below the 97.95–98.00 cap, the structure favours a Buy bias on dips toward 1.3560 with upside potential toward 1.3690, then 1.3760, and a stretch target back into the 1.3850–1.3870 supply zone if DXY slips through 97.20. A daily close below 1.3580 would downgrade the view to Hold, as it would signal that the correction is extending and that 1.3535 is at risk. Only a decisive break under 1.3290, likely accompanied by a DXY push back above 98.00 and a more aggressive repricing of BoE cuts, would justify shifting to a clear Sell stance. Until that bearish combination appears, the balance of probabilities stays skewed toward GBP/USD grinding higher from the current 1.3600 area rather than breaking down.

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