GBP/USD Price Forecast: Struggles to hold 1.3500 amid VCP breakdown

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The Pound Sterling (GBP) trades with caution near 1.3500 against the US Dollar (USD) during the European trading session on Thursday, the lowest level seen in almost four weeks.

GBP/USD trades vulnerably near 1.3500 as soft UK labor market and inflation data drag the Pound Sterling.
Investors await the UK Retail Sales and preliminary S&P Global PMI data.
FOMC Minutes showed that policymakers are not in a rush to lower interest rates.

The Pound Sterling (GBP) trades with caution near 1.3500 against the US Dollar (USD) during the European trading session on Thursday, the lowest level seen in almost four weeks. The GBP/USD pair is under pressure as cooling United Kingdom (UK) inflation and job market conditions have weighed heavily on the British currency.

Pound Sterling Price This week

The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the weakest against the US Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.64%	1.08%	1.63%	0.55%	0.02%	0.83%	0.54%
EUR	-0.64%		0.44%	1.01%	-0.09%	-0.63%	0.19%	-0.10%
GBP	-1.08%	-0.44%		0.29%	-0.53%	-1.07%	-0.26%	-0.55%
JPY	-1.63%	-1.01%	-0.29%		-1.08%	-1.57%	-0.79%	-1.05%
CAD	-0.55%	0.09%	0.53%	1.08%		-0.56%	0.29%	-0.02%
AUD	-0.02%	0.63%	1.07%	1.57%	0.56%		0.82%	0.52%
NZD	-0.83%	-0.19%	0.26%	0.79%	-0.29%	-0.82%		-0.29%
CHF	-0.54%	0.10%	0.55%	1.05%	0.02%	-0.52%	0.29%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

This week, the Office for National Statistics (ONS) reported that the ILO Unemployment Rate jumped to 5.2% in the three months ending in December, the highest level seen in five years, and the headline Consumer Price Index (CPI) growth dropped to 3% Year-on-Year (YoY) in January, as expected, from 3.4% in December.

Going forward, major triggers for the Pound Sterling will be UK Retail Sales data for January and the flash S&P Global Purchasing Managers’ Index (PMI) data for February, which will be published on Friday.

Meanwhile, the upbeat US Dollar is also acting as a key drag on the GBP/USD pair. The US Dollar shows strength as the Federal Open Market Committee (FOMC) minutes of the January policy meeting showed on Wednesday that several policymakers are not in a hurry for interest rate cuts unless they see progress in inflation returning to the 2% target.

GBP/USD technical analysis

GBP/USD trades cautiously at around 1.3500 at the press time. It trades below the 20-period Exponential Moving Average (EMA) at 1.3557. The average trends lower, keeping intraday rebounds capped.

The 14-period Relative Strength Index (RSI) at 33.74 reflects weak momentum near, but not at, oversold territory, suggesting more downside remains likely.

Price has been trending lower since the breakdown of the Symmetrical Triangle formation, also known as the Volatility Contraction Pattern (VCP), which typically results in wider ticks and heavy volume. Looking down, Cable could extend its decline towards the January 22 low around 1.3400 if it breaks below Tuesday's low of 1.3500.

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

Economic Indicator

Consumer Price Index (YoY)

The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Why it matters to traders?

The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.

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