• GBP/USD edges lower amid holiday-thinned trading and mixed post-US CPI market sentiment.
• Disinflation trends could reinforce rate-cut expectations at the Bank of England.
• Political risks tied to Keir Starmer remain a latent headwind for Sterling.

The Pound Sterling (GBP) retreats during the North American session on Monday amid thin liquidity conditions as US markets remain closed in observance of the President’s Day. At the time of writing, GBP/USD trades at 1.3635, down 0.12%.

Sterling eases on low liquidity with US markets shut, while traders await UK jobs and inflation data

Market mood is mixed following last week’s inflation report in the US, which revealed that prices are cooling, fueling speculation of additional rate cuts by the Federal Reserve (Fed). A scarce economic docket on both sides of the Atlantic keeps investors eyeing the release of the UK’s jobs and inflation data on Tuesday and Wednesday, respectively.

The labor market in the UK is expected to remain solid. The Consumer Price Index (CPI) is expected to come at -0.5% MoM and at 3% YoY in January, beneath December’s print.

The resumption of the disinflation process could prompt the Bank of England (BoE) to reduce interest rates.

A Reuters poll revealed that economists expect a rate cut by the BoE at the March 19 meeting. More than 60% of respondents (41 of 63) expect the BoE to cut rates by 25 basis points (bps) to 3.50%, on a survey conducted February 10-16.

In the meantime, political turmoil in the UK eased as the Labour Party supported the British PM Keir Starmer, who last week pledged to stay in his job, amid growing tensions over picking Peter Mandelson to be the UK’s ambassador in the US.

Despite this, ING FX Strategist Francesco Pesole stated that “The pound should continue to face depreciation episodes whenever Starmer’s political position deteriorates.”

In the US, the economic docket will feature Fed speeches, Durable Goods Orders, housing data and the release of the Federal Open Market Committee (FOMC) monetary policy meeting minutes.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3633. The triple simple moving average set trends higher, underscoring a steady advance. Price holds above the latest moving baseline at 1.3518, preserving a bullish structure. The FXS Fed Sentiment Index has softened from prior highs, tempering immediate upside pressure without derailing the prevailing trend.

The rising trend line from 1.3035 underpins the advance, with support aligning near 1.3506. As long as the pair respects that trend-line base, dips should stay contained and the bias points higher. A daily close beneath this floor could flag fading momentum and open the door to a deeper corrective phase.

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