GBP/USD Price Stays Above 1.34 as Sticky UK Inflation Collides With Fed Cut Hopes

GBP/USD Holds Near 1.34 As Sticky UK CPI Clashes With Fed Cut Bets

GBP/USD: Price Trapped Between 1.3350 Support And 1.3475 Resistance

GBP/USD is boxed in. Spot has been orbiting the 1.3420–1.3450 area, with this week’s low near 1.3350 and a recent two-day high at 1.3475. Price is sitting just under the 1.3430–1.3450 band where repeated upper wicks have printed, showing supply around that zone. A quote of 1.1357 appears in one source, but surrounding context and other prints near 1.3430 make clear that cable is trading in the mid-1.34s, not the low-1.13s. The market is effectively compressing between 1.3380–1.3340 support and 1.3485–1.3525 resistance, waiting for the next macro trigger.

UK Inflation At 3.4% Forces A Rethink Of The GBP Narrative

The UK inflation surprise is central to why GBP/USD is still holding above 1.34 instead of slipping back toward 1.30. Headline CPI for December printed at 3.4% year-on-year, above the 3.3% consensus and up from 3.2% in November. Core CPI stayed elevated at 3.2%. Producer prices are not benign either, with PPI at 3.4%, while the Retail Price Index is running hotter at 4.2%. Those are not numbers that justify an aggressive easing cycle from the Bank of England.

Despite that, most economists still expect the BoE to cut once in the first half of 2026, banking on base effects from last year’s energy spike to pull CPI down. That single expected cut acts as a ceiling on GBP/USD rallies because markets refuse to price a sustained policy divergence in favour of sterling. The result is a “sticky inflation, hesitant central bank” regime: enough pricing power to keep UK real yields from collapsing, but not enough to convince traders that rates will be held high for much longer.

That tension explains the muted reaction: inflation at 3.4% would normally propel GBP/USD sharply higher, yet the pair is only modestly above 1.34, not pressing hard on 1.36–1.38. The market is effectively saying: inflation is sticky now, but the BoE will still blink later.

UK Consumer Data And PMIs Put A Cap On GBP/USD Upside

The next UK prints are not supportive for a runaway rally. December retail sales are expected to fall by 0.1% month-on-month, marking a third consecutive decline. That would confirm that higher borrowing costs are biting household spending. On top of that, S&P Global PMIs for January will show whether services and manufacturing momentum is stabilising or rolling over again.

If retail sales miss expectations and PMIs soften, the market will lean harder into the BoE-cut story despite CPI at 3.4%. That dynamic would make the 1.3485–1.3525 zone a heavy ceiling for GBP/USD in the near term. Traders know that a currency cannot rely on inflation alone; it needs growth and consumer resilience as well. Weak UK demand data would reinforce the idea that current inflation is more of a lagged shock than a sustainable price-pressure story, limiting how far sterling can stretch.

US Growth At 4.4% And Firm Labour Data Support USD, But Fed Cut Pricing Limits The Damage

On the USD side, the macro matrix is strong but not strong enough to crush GBP/USD. US Q3 2025 GDP was revised up to 4.4% versus 4.3% expected, with momentum driven by exports and a reduced drag from inventories. Labour data are similarly solid: weekly initial jobless claims are running at 200,000, marginally above the prior 199,000 but well below the 212,000 forecast. Continuing claims stand at 1.849 million, the lowest since November, signalling tight labour conditions.

Despite that backdrop, the US Dollar Index has slipped about 0.25% to around 98.55, and markets still price roughly 42 basis points of Fed easing by year-end, with the policy rate currently anchored in the 3.50–3.75% region. Strong growth plus rate-cut expectations is an unusual mix: it keeps the dollar from collapsing but also stops it from trending powerfully higher. That’s exactly what is visible in GBP/USD: the USD is not strong enough to break 1.33 decisively, but not weak enough to allow a clean breakout through 1.36 without further catalysts.

Greenland Tariff U-Turn And Risk Appetite Give GBP/USD A Tailwind

The geopolitics around Greenland are a direct driver of the recent bounce in GBP/USD. Trump’s earlier threat to impose 10% tariffs from February 1 on goods from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland created a clear trade-war overhang. That risk is now partially neutralised after he announced a framework agreement with NATO over Greenland and explicitly stepped back from those February tariff plans.

This de-escalation has two effects. First, it lifts European risk assets and reduces the need for defensive dollar flows. Second, it boosts sterling specifically by taking direct tariff risk off UK exporters. That is why GBP/USD has pushed up toward 1.3450 even though US GDP and jobless numbers have been firm. Risk appetite has improved, and the dollar’s safe-haven premium is fading.

This sits alongside broader market context: EUR/USD has pulled back only modestly from 1.1770 to the 1.17 area, gold is still elevated and eyeing the $5,000 per ounce threshold, and the DXY is holding in the high-90s instead of breaking higher. The upshot is that a softer dollar and reduced tariff risk are acting as a floor under GBP/USD around 1.33–1.34.

Weekly Structure: GBP/USD Flag Points Toward 1.38–1.42 If 1.3570 Breaks

On the weekly chart, GBP/USD has been in extended consolidation since 2023. Price recently pulled back from a resistance line that connects higher highs between July 2023 and September 2024, sitting just above the 1.30 area. The rebound off the 1.30–1.2940 zone is now tracing a potential bullish flag, a classic continuation setup after a prior advance.

Weekly RSI is holding above the 50 neutral level, signalling underlying bullish bias rather than a topping structure. The key confirmation level is 1.3570. A sustained hold above 1.3570 would complete the flag and open a move toward the 2-plus-year resistance near 1.38. Above 1.38, the next structural target sits around the 2021 highs near 1.42.

On the downside, 1.33 is the line that protects the bullish narrative. A clean break and weekly close below 1.33 would invalidate the continuation pattern and drag GBP/USD back toward 1.30–1.2940. Below 1.2940, the map points to 1.2740 first and then 1.2480 as deeper supports. In other words, the medium-term risk-reward currently leans to the upside while 1.33 holds; once that level is lost, the entire structure morphs into a broader range or even a new down-leg.

Daily And Intraday Technicals: GBP/USD Coiled Around 1.3423 Pivot

Zooming in, the daily chart shows GBP/USD glued to a pivotal area. Price is sitting near a Murrey Math “reverse” level at 1.3423 and just above the 23.6% Fibonacci retracement at 1.3386. The pair has edged slightly above the 50-day exponential moving average and is also holding above the 50-day simple moving average cluster near 1.3406.

The 200-day SMA sits lower at 1.3341, while on intraday charts the 50- and 200-period EMAs are converging around 1.3420–1.3440. That confluence turns the current zone into a classic decision area rather than a clear directional signal. RSI on shorter time frames is oscillating in a tight 48–50 band, confirming the lack of momentum.

Price behaviour around 1.3430–1.3450 is revealing: repeated small candle bodies and upper wicks into ~1.3450 show intraday selling pressure there. Yet dips toward 1.3380 and 1.3340 continue to attract buyers. That is exactly what a coiled market looks like before a larger move. Range dynamics can persist, but they do not last indefinitely around this kind of macro backdrop.

Key intraday levels from the current map:
– Immediate support: 1.3380, then 1.3340
– Deeper supports: 1.33, then 1.30–1.2940 if the weekly structure fails
– First resistance: 1.3485
– Next resistance cluster: 1.3525–1.3570
– Higher-up targets: 1.38 and 1.42 if the weekly breakout completes

Pattern Set-Up: Flag, Inverted Head-And-Shoulders And Congested EMAs On GBP/USD

Pattern alignment leans modestly bullish for GBP/USD. On the daily, price has traced an inverted head-and-shoulders, with the neckline forming near the current 1.3420–1.3450 band. At the same time, the earlier vertical rally from the 1.30–1.2940 zone followed by the current downward-sloping consolidation channel forms a bullish flag.

The fact that both patterns cluster around the same pivot (roughly 1.3420–1.3450) increases the importance of this zone. A decisive push above 1.3460–1.3485 would:
– Complete the inverted head-and-shoulders
– Break the upper boundary of the flag
– Pull price away from the congested EMA cluster, freeing it to test 1.3525 and 1.3570

Conversely, a failure here and a slide back below 1.3380, then 1.3340, would signal that the patterns are failing and that GBP/USD is more likely to retest 1.33 and potentially the 1.30–1.2940 base. At that point, the narrative shifts from “bullish continuation” to “broad consolidation”.

Event Risk Runway: Retail Sales, PMIs, GDP And US PCE As Catalysts For GBP/USD

The calendar is loaded with triggers that can break this range. In the UK, the immediate focus is:
– December retail sales, expected at –0.1% m/m (third consecutive drop)
– S&P Global PMIs for January, which will show whether services and manufacturing are stabilising or slowing
– The final Q3 GDP estimate, where economists expect growth above 4%

A GDP print north of 4% paired with CPI at 3.4% and retail sales that are weak but not collapsing would support the view that the UK economy can absorb higher real rates for longer. That combination would favour GBP resilience and help push GBP/USD through 1.3485–1.3525.

On the US side, the key items are the PCE inflation data and fresh jobless-claims figures. If core PCE softens while claims stay near 200,000 and continuing claims remain around 1.849 million, the market will double down on the “soft landing plus gradual cuts” narrative already reflected in the 42 bps of pricing. That mix is not toxic for USD, but it caps upside and keeps pairs like GBP/USD biased higher so long as foreign central banks are not racing to ease faster.

Any upside surprise in PCE or a sharp risk-off shift tied to renewed tariff threats or geopolitical shocks would flip that balance back toward the dollar. In that case, 1.3380 and then 1.3340 would be tested quickly.

Trading Stance On GBP/USD: Moderately Bullish Bias, Conditional Buy

Putting the pieces together, the balance of evidence favours a moderately bullish stance on GBP/USD, not a complacent one. Sticky UK inflation at 3.4%, core at 3.2%, PPI at 3.4% and RPI at 4.2% argue against an aggressive BoE easing cycle. US GDP at 4.4% and jobless claims at 200,000 support the dollar, but 42 bps of Fed cuts priced, a DXY around 98.55 and the Greenland tariff U-turn keep USD from regaining strong-trend status. Technically, the weekly flag and daily inverted head-and-shoulders above 1.3386–1.3423 favour upside as long as 1.33 holds.

On that basis, the stance is:
– Overall view: GBP/USD = Buy / bullish bias while above 1.33
– Preferred tactical plan: accumulate on a sustained break and daily close above 1.3460–1.3485, targeting first 1.3525 and then 1.3565–1.3570
– Structural targets on confirmation: 1.38 and potentially 1.42 over the medium term if the weekly pattern completes
– Invalidation: a decisive move below 1.3380 followed by a break of 1.33 would downgrade the view to neutral, with risk of a slide toward 1.30–1.2940 and, if that fails, 1.2740–1.2480

Until the 1.3460–1.3485 cap is taken out or 1.33 is lost, GBP/USD remains in compression, but the weight of inflation data, Fed pricing and chart structure leans in favour of the bulls, not the bears.

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