The Pound Sterling (GBP) is trading around 1.2930 against the US Dollar (USD), maintaining a four-month high as the US Dollar Index (DXY) approaches 103.30. Market focus is on upcoming US Consumer Price Index (CPI) data, with year-on-year headline inflation anticipated at 2.9%, down from 3% in January.
Traders are expecting the Federal Reserve to potentially reduce interest rates by May, with probabilities increasing to 51% from 37%. The uncertainty surrounding US trade policies has led Fed officials to adopt a cautious approach regarding monetary policy.
British Pound Performance
Meanwhile, the GBP is performing well against major currencies, driven by expectations that the Bank of England (BoE) will maintain interest rates due to robust wage growth. Upcoming UK GDP and factory data will be closely watched, with growth projected at 0.1%.
Technically, the GBP/USD pair shows bullish momentum, surpassing the 61.8% Fibonacci retracement, with key support levels at 1.2767 and 1.2608. Resistance is noted at the psychological level of 1.3000.
With the Pound Sterling lingering near 1.2930 and holding at levels not seen in four months, the market is clearly leaning towards strength in the British currency. This rise comes as the US Dollar Index hovers near 103.30, suggesting that broader dollar movements are playing a part in shaping the current exchange rate. Traders are now looking ahead to US inflation data, which is expected to show a slight annual slowdown from 3% to 2.9%—a shift that could validate expectations for rate cuts from the Federal Reserve.
At the moment, interest rate traders are pricing a growing chance of a rate reduction from the Fed by May, with odds now reaching 51%, up from 37%. This shift reflects changing sentiment around US monetary policy, especially as uncertainty builds around trade strategies from the United States. Policymakers remain hesitant, with officials expressing caution as they navigate the balance between economic data and external risks.
Meanwhile, Sterling is proving resilient across multiple currency pairs, underpinned by the belief that the Bank of England may hold rates steady for longer. Wages in the UK continue to grow at a pace that could prevent the BoE from easing policy anytime soon. With upcoming data on economic growth and factory production, markets will be looking for signs that the economy is managing to avoid stagnation. Current expectations for GDP indicate a modest 0.1% increase, which will help determine whether the BoE maintains its stance or begins shifting its tone.
Technical Analysis Outlook
From a technical analysis perspective, GBP/USD continues to exhibit strength, having moved above the 61.8% Fibonacci retracement level. The next test for this pair will be the psychological barrier at 1.3000, where traders may look to take profits or reassess positions. If momentum reverses, attention will turn to the support zones of 1.2767 and 1.2608, which have previously acted as stabilising levels. These areas will serve as key references in the coming sessions, especially given how sentiment has shaped positioning in recent weeks.
With uncertainty still present on both sides of this currency pair, the coming data releases and central bank rhetoric will likely dictate whether the recent trend persists or a pullback is due.
