GBP/USD drifts lower as Iran oil shock clouds the BoE rate outlook

• The BoE held rates unanimously at 3.75% in March, warning the Iran conflict could push CPI to 3.5% in the coming quarters.
• The Fed held at 3.50% to 3.75%, with Chair Powell noting inflation is not falling as quickly as hoped.
• Friday's UK retail sales and UoM inflation expectations could set the tone for both sides of the pair.

GBP/USD slipped about 0.1% on Thursday, settling around 1.3340 in a choppy session. The pair has been trading in a roughly 200-pip range between 1.3230 and 1.3430 for most of March, with a series of lower highs since the late-January peak close to 1.3820 pointing to a gradual loss of upside momentum. Thursday's candle showed a brief spike lower toward 1.3310 during the US session before buyers stepped in to recover some ground.

The Bank of England (BoE) held Bank Rate at 3.75% at its March 19 meeting in a unanimous vote, a stark shift from the 5-4 split in February when a cut had been a realistic prospect. The war in the Middle East and the effective closure of the Strait of Hormuz have transformed the UK rate outlook; markets that had been pricing in two cuts before the conflict are now expecting rates to hold for the rest of 2026 or even rise. The BoE warned that Consumer Price Index (CPI) inflation, which held at 3% in February, could climb to 3.5% in the coming quarters as energy costs feed through.

Friday brings UK February retail sales (consensus -0.8% MoM) and GfK consumer confidence for March, which came in at -21, a slight improvement on the -24 consensus but still deeply negative. Weak retail figures would underscore the tension between rising inflation and softening demand that the Monetary Policy Committee (MPC) flagged in its March minutes.

On the US Dollar side, the Federal Reserve (Fed) held the federal funds rate at 3.50% to 3.75% at its March meeting, with the updated dot plot pointing to one cut this year. Thursday's initial jobless claims printed exactly in line at 210K, doing little to shift the dial. Friday's University of Michigan (UoM) consumer sentiment (consensus 54, prior 55.5) and one-year inflation expectations (consensus 3.4%) will be the key US release; any upside surprise in the inflation expectations reading would reinforce the Fed's cautious stance and support Dollar strength heading into the April Federal Open Market Committee (FOMC) meeting.

GBP/USD five-minute chart

Technical Analysis

In the 5-minute chart, GBP/USD trades at 1.3340. The near-term bias is mildly bullish as price grinds back above the session’s clustering around 1.3336–1.3338 while holding just under the gently declining 200-period EMA near 1.3342. The Stochastic RSI has recovered from mid-range readings and leans higher, signalling improving upside momentum rather than oversold or overbought stress, which supports the prospect of a gradual push through the nearby moving-average cap rather than an immediate reversal lower.

Initial resistance stands at the 200-period EMA around 1.3342, and a sustained break above this gauge would open the way toward 1.3350, where intraday supply is likely to re-emerge. On the downside, immediate support is at 1.3335, guarding a softer shelf at 1.3330; a move below this band would question the current uptick and re-expose the pair toward 1.3320. As long as GBP/USD holds above 1.3335, intraday dips are likely to be bought with the focus on a test of the 1.3342–1.3350 resistance corridor.

In the daily chart, GBP/USD trades at 1.3340. The near-term bias is mildly bearish as spot holds beneath the gently descending 50-day EMA near 1.3430 while remaining only marginally above the flatter 200-day EMA around 1.3370, keeping price compressed between medium- and long-term trend markers. This configuration points to fading upside momentum after the late rebound, with the Stochastic RSI advancing out of oversold territory toward the 80 region but not yet confirming a strong continuation leg, suggesting rallies face supply rather than impulsive demand.

Immediate resistance emerges at the 50-day EMA around 1.3430, and a daily close above this area would be needed to ease downside pressure and expose the 1.3500 region next. On the downside, initial support sits just under the market at the 200-day EMA near 1.3370, with a clear break lower opening the way toward the recent swing area around 1.3250, where buyers last attempted to stabilize the pair. A failure to reclaim the 1.3430 barrier while oscillators remain elevated would keep the risk skewed toward a retest of that 1.3250 support zone in the coming sessions.

(The technical analysis of this story was written with the help of an AI tool.)