GBP/USD tests key moving averages as growth downgrade weighs
- The Pound Sterling clings to the 200-day EMA near 1.3380 amid a weaker UK growth outlook and broad US Dollar strength.
- The OBR downgraded its 2026 UK growth forecast to 1.1% from 1.4% in its Spring Statement update, with forecasts finalised before the Middle East conflict escalated.
- US ADP payrolls came in well above consensus at 63K on Wednesday; NFP and retail sales on Friday are the only remaining high-impact events on the US-dominated economic calendar this week.
GBP/USD was nearly flat on Wednesday, edging up 0.08% to settle around 1.3370 in a quiet session. The pair has fallen sharply from its late-January high near 1.3870 and is now testing the 200-day Exponential Moving Average (EMA), with this week's one-week forex heatmap showing Pound Sterling as one of the worst performers against the US Dollar, down about 1.4% on the week.
Chancellor Rachel Reeves delivered her Spring Statement earlier this week, with the Office for Budget Responsibility (OBR) cutting its 2026 growth forecast to 1.1% from 1.4%, citing weaker-than-expected activity in late 2025 and rising unemployment. The OBR acknowledged that the forecasts were finalised before the US-Israeli strikes on Iran, warning the conflict "could have very significant impacts on the global and UK economies." Surging energy prices following the closure of the Strait of Hormuz have already pushed markets to scale back expectations for a Bank of England (BoE) rate cut at the March 19 meeting, with futures now pricing less than a 15% probability of a move.
On the US side, safe-haven demand continues to support the Greenback, and only US data remains on the economic calendar for the rest of the week, headlined by Friday's Nonfarm Payrolls and January Retail Sales.
GBP/USD daily chart
Technical Analysis
In the daily chart, GBP/USD trades at 1.3370. The near-term bias is mildly bearish as spot slips beneath the 50-day exponential moving average, while the 200-day average continues to trend below price, signalling that the broader uptrend is losing momentum rather than fully reversing. The Stochastic oscillator holds in lower territory after a steady decline from overbought conditions, indicating persistent downside pressure and limited buying interest on rebounds. Price action has carved out a sequence of lower highs from the 1.38 area, which reinforces the corrective tone as long as daily closes remain capped below the 50-day average.
Initial resistance aligns with the 50-day EMA near 1.3505, and a daily close above this area would be needed to ease immediate downside risks and refocus the 1.3650 region. On the downside, the 200-day EMA around 1.3375 is the first support to monitor, with a sustained break exposing the late pullback lows at 1.3360 and then 1.3300. A move through these supports would confirm that sellers are extending control, opening the way toward deeper retracement levels on the medium-term chart.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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