FX.co ★ Helsinki | GBP/USD

From a fundamental perspective, the pound faces numerous headwinds that limit its upside potential, despite the dollar not benefiting from safe havens. U.S. President Trump’s erratic trade policies continue to overshadow geopolitical risks, with the Supreme Court rejecting emergency tariffs only to be replaced by a new global tariff system of 10-15% that increases market certainty and serves as a win-win for the assets, including dollars. That prevented the dollar from benefiting from safe haven demand despite ongoing U.S.-Iran tensions, with the Omani foreign minister indicating "significant progress" in the Geneva talks and technical discussions for next week, leaving the hours open for potential diplomatic arrangements. The British pound is facing pressure of its own from rising expectations of an interest rate cut by the Bank of England, with markets already on a rally in May. Governor Bailey’s testimony points to the possibility of a rate cut, as inflation is expected to return to the 2% target, contrary to the Fed’s expectations of a rate cut in the second half of the year. Adding to Sterling’s woes, Prime Minister Starmer’s Labor Party suffered embarrassing defeats to the Greens in Gorton and Denton – its first victory in Westminster – raising questions about political stability ahead of the next general election. Looking ahead, a data-heavy U.S. calendar will support near-term volatility, with the ISM Manufacturing PMI, ADP Employment Index, ISM Services PMI, jobless claims, and Friday’s key nonfarm payroll report providing new signals about the Fed’s policy path. The UK is set to release its annual budget on Tuesday, although weak domestic data has the pound reacting primarily to the dollar’s performance and broader risk sentiment.

From a technical perspective, GBP/USD is trading around 1.3450, just above the one-month low of 1.3434 a week ago, as the pair enters a bearish consolidation phase. The daily chart is showing a cautious bearish configuration with the price moving below the 20-day simple moving average at 1.3600 while staying above the rising 100-day SMA at 1.3400 and the 200-day34 SMA at 1.05. This situation, where the price is below the short-term moving average but above the long-term support, indicates a period of correction within the broader uptrend, rather than a complete reversal of the trend. A fall from the 20-day SMA below the 100-day SMA would indicate increased bearish momentum, although this has not yet happened. Momentum indicators reinforce bearish sentiment but do not signal oversold conditions. The 14-day relative strength index (RSI) fell to 41, staying below the neutral centerline of 50 and reflecting the growing downward pressure. This position suggests that sellers have regained the initiative in the short term, although the lack of oversold readings below 30 indicates that further declines remain possible before exhaustion begins. The declining momentum coincides with the recent pullback from the 1.3860 range, confirming that the bearish momentum is building rather than building. From a Fibonacci perspective, measuring from the December low of 1.3348 to the January high of 1.3862 provides clear reference levels. The price broke below the 38.2% retracement level at 1.3666, entering deeper retracement territories and confirming sellers’ control over the near-term direction. Nearby resistance is at the 50.0% pullback at 1.3605, with the 38.2% retracement at 1.3666 above representing a critical level where the 20-day SMA convergence forms a huge ceiling. A sustained break above 1.3666 would soften bearish sentiment and pave the way for a retest of the 23.6% pullback at 1.3741. On the downside, initial support is centered on the 200-day SMA at 1.3450, followed by the 100-day SMA around 1.3400, where the long-term trend base is flat. A clear decline through this moving average zone would expose the previous swing low at 1.3348 and potentially transform the broader structure into a more decisive medium-term decline.