• Pound Sterling drops toward 1.3350 as Labour's by-election loss and the Middle East conflict cloud the outlook ahead of the BoE's March 19 decision.
• The BoE held rates at 3.75% in a narrow 5-4 vote in February, with Governor Bailey calling the March decision "a genuinely open question" while flagging that services inflation at 4.4% has not eased as much as expected.
• Labour's loss in the Gorton and Denton by-election has fueled uncertainty over PM Starmer's leadership, while the Iran conflict and surging oil prices are prompting markets to scale back BoE rate cut bets on inflation concerns.

GBP/USD fell about 0.35% on Tuesday, settling around 1.3350 after slipping below the 200-day Exponential Moving Average (EMA) for the first time since early December. The pair has pulled back sharply from its late-January high near 1.3870, shedding over 500 pips in a series of lower highs and lower lows. A cluster of mixed candles over the past two weeks had pointed to indecision, but the latest move lower suggests sellers are regaining control.

The Bank of England (BoE) held rates at 3.75% in February by a narrow 5-4 vote, with Governor Andrew Bailey casting the deciding vote to hold. Testifying before parliament's Treasury Committee, Bailey said a March rate cut is "a genuinely open question," noting that services inflation came in at 4.4% in January, well above the BoE's forecast. Chief Economist Huw Pill echoed the caution, warning against cutting too quickly. However, the escalating conflict in the Middle East has added a new dimension; surging oil prices threaten to push UK inflation higher, and markets have begun to scale back expectations for a March cut. UK government bond yields rose sharply on Monday as traders repriced the rate path. Adding to the pressure on Pound Sterling, Labour's loss in the Gorton and Denton by-election has renewed questions about PM Starmer's leadership and Chancellor Reeves's fiscal plans, with investors wary that political instability could lead to a looser spending stance.

On the US Dollar side, the Federal Reserve (Fed) held rates at 3.50% to 3.75% in January, with the minutes showing several participants discussed raising rates if inflation stays above target. The safe-haven Dollar has strengthened on the back of the Iran crisis, adding to headwinds for the pair.

GBP/USD daily chart

Technical Analysis

In the daily chart, GBP/USD trades at 1.3355. The near-term bias is mildly bearish as spot has slipped below the 50-day exponential moving average around 1.3510 and is now testing the 200-day EMA near 1.3375 from above. This loss of support from the shorter average signals fading upside momentum, while the longer average acts as last-line trend support. The Stochastic oscillator has recovered from oversold territory but holds in the mid-20s, indicating weak buying pressure and keeping the risk tilted to the downside while below the broken 50-day average.

Immediate resistance emerges at the 1.3400–1.3425 area, where recent closing prices clustered ahead of the 200-day EMA, followed by stronger resistance at the 1.3510 zone defined by the 50-day EMA. A daily close above 1.3510 would be required to neutralize the current downside bias and reopen the 1.36 region. On the downside, the 1.3300 handle is the first support beneath the 200-day EMA, with a break lower exposing the late swing low near 1.3200 as the next bearish target. As long as price holds below 1.3510 and momentum remains subdued, rallies are likely to face selling interest into nearby resistance.

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