• GBP/USD drops 0.73% to 1.3304 as DXY jumps to 99.31.
• Oil-driven inflation fears fuel safe-haven demand for the Greenback.
• BoE March cut odds tumble from 75% to 28%, reshaping policy outlook.

The Pound Sterling (GBP) extends its losses on Tuesday during the North American session as the conflict in the Middle East involving the US, Israel and Iran intensified, fueling a flight to safety sponsored by inflationary pressures on high Oil prices.

Risk aversion and fading BoE cut expectations weigh on Sterling

GBP/USD trades at 1.3304, down 0.73% as the Greenback remains bid. The US Dollar Index (DXY), which measures the buck’s value against a basket of six currencies, is up 0.78% at 99.31 near the highs of the day.

Market sentiment continues to deteriorate as geopolitical news emerged. Iran’s envoy to the United Nations (UN) said that Tehran has not contacted the US about possible peace talks, while sirens sounded in Kuwait, according to Al Hadath.

The lack of economic data in the US left traders adrift on comments by Federal Reserve (Fed) officials.

New York Fed President John Williams commented that the easing cycle remains on track if inflation pressures moderate, as he expects. He added that, “Monetary policy is currently well positioned to support the stabilization of the labor market and return inflation to our 2% goal.”

Later, Kansas City Fed Jeffrey Schmid was hawkish, saying inflation is too hot and there is no room for complacency. He said that he heard optimism from contacts about the economy this year, and that they share the same feeling, adding that the growth trajectory remains strong, helped by fiscal policy.

In the UK, the finance minister Rachel Reeves said that the economy is expected to grow by 1.1% in 2026, weaker than the Office for Budget Responsibility (OBR) projection of 1.4%. She added that “this government has the right economic plan for our country, a plan that is even more important in a world that in the last few days has become yet more uncertain.”

Expectations that the Bank of England was going to cut rates at the March meeting faded with odds standing at around a 75% chance last Friday, but so far, money markets have priced in only a 28% chance of a reduction.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3294. The near-term bias is mildly bearish as spot slides below the clustered simple moving averages around 1.3500, signaling a loss of upside momentum after repeated failures along the descending resistance line from 1.3869. The upward-sloping support trend line from 1.3035 has given way with price now holding under the 1.3586 break area, reinforcing the shift toward a corrective phase. The deterioration in price action aligns with the ongoing softening in the Fed Sentiment Index, which has been grinding lower, suggesting waning bullish conviction in the pair.

Immediate resistance emerges near 1.3400, where the broken support line and the lower edge of the moving average cluster converge, followed by 1.3498 and then the 1.3550 region, both aligned with prior reaction highs capped by the descending trend line. On the downside, initial support stands at the recent low around 1.3290, with a break exposing 1.3200 and then the 1.3100 area, levels that precede the origin of the broader rising trend from 1.3035. A daily close back above 1.3550 would be needed to negate the current bearish tone and reopen the topside toward 1.37.

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