fell to 1.3627 on Thursday. Investors are awaiting the outcome of today's Bank of England meeting.
UK interest rates are expected to fall throughout the year. However, the regulator is unlikely to provide clear signals on the timing and scale of easing as it needs to wait for a clearer picture of inflation.
Additional pressure on the US dollar comes from the delay in the release of key US labor market data due to the partial government shutdown. This increases uncertainty about the Federal Reserve's future policy.
By the end of the year, global markets are pricing in around 35 basis points of Bank of England easing – a 25bp cut and a second cut with a probability of around 40%.
Political risks persist in the United Kingdom. Investors' attention is focused on the by-elections that will be held in Gorton and Denton County on February 26, in addition to the local elections in May. Polls show a rise in support for the Reform UK party. He is ahead of both Prime Minister Keir Starmer's Labor Party and Kemi Badenoch's Conservatives, even though a general election is not scheduled until 2029.
Technical analysis
On the H4 chart, after a strong rally in the second half of January and a new high in the 1.3850-1.3880 zone, GBP/USD entered a correction phase. The price has turned down from the upper end of the Bollinger Bands and is now testing the support area between 1.3620 and 1.3650. The bullish momentum has weakened, leaving the short-term structure between neutral and bearish. At the same time, the broader bullish backdrop has yet to be broken.
On the lower H1 chart, a descending corrective channel has formed. The price is constantly making lower lows and remains close to the lower Bollinger Bands. Selling pressure persists, with the nearest support between 1.3520 and 1.3550. To stabilize, the market would need to perform above the 1.3660-1.3700 zone.
Conclusion
In summary, GBP/USD is experiencing a tactical pullback driven by pre-BoE caution and delayed US data, which is creating a temporary dollar squeeze. The technical correction appears orderly and is testing key support within a broader bullish structure.
The short-term path depends almost entirely on the tone of the Bank of England today: any sign of moderation could extend the correction towards 1.3520, while a neutral or aggressive hold could trigger a recovery attempt. Political uncertainty in the UK adds a layer of medium-term risk, but for now, the main focus remains on monetary policy signals and defending the 1.3620 support zone.
By RoboForex Analysis Department
Disclaimer:
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
