FX.co ★ GBP/USD

GBP weakened as strong US labor data and risk-off sentiment boosted the dollar. BoE rate-cut expectations (81%) and UK political uncertainty pressured sterling. GBP/USD faces downside risk below key demand at 1.3450, with supply capped near 1.3550. The British pound weakened against the US dollar on Thursday as the greenback held firm, supported by stronger-than-expected US labor market data. Lower jobless claims reinforced confidence in economic resilience, encouraging demand for the dollar and placing renewed pressure on the pound. Broader market sentiment also deteriorated following Nvidia’s earnings release, which, despite solid results, triggered concerns about stretched valuations in the artificial intelligence sector. Market participants remain uneasy about whether the recent AI-driven rally can be sustained, especially after Wall Street recorded losses ranging between 0.28% and 2%. Investors are increasingly cautious, seeking confirmation that earnings growth can justify current valuations. This cautious tone strengthened safe-haven demand for the dollar, keeping the pound on the defensive throughout the session. US initial jobless claims rose slightly to 212,000 in the week ending February 21, but still undershot market expectations of 215,000. The data confirmed ongoing stability in labor conditions, reinforcing the Federal Reserve’s cautious optimism about economic momentum. Combined with recent employment figures, the report suggests that underlying demand in the US economy remains firm. Federal Reserve Governor Stephen Milan reiterated his dovish outlook, stating his preference for a cumulative 100 basis point rate cut this year. However, he emphasized that inflation pressures appear contained, reducing urgency for aggressive easing. This balance between policy flexibility and economic resilience continues to support the dollar, limiting upside potential for GBP/USD. Across the Atlantic, political uncertainty in the United Kingdom added further headwinds to sterling. Prime Minister Keir Starmer faces growing scrutiny following controversy surrounding the nomination of Peter Mandelson as US ambassador. With crucial local elections approaching, political risks remain elevated, and any unfavorable outcome could intensify leadership challenges, undermining confidence in the pound. At the same time, speculation surrounding an imminent interest rate cut by the Bank of England is gaining traction. Governor Andrew Bailey described the decision as a “really open issue,” acknowledging sluggish growth and rising unemployment. According to market pricing, there is now an 81% probability of a BoE rate cut at the March 19 meeting, a factor that continues to weigh heavily on sterling. GBP/USD is trading near 1.3485, showing signs of short-term vulnerability. The pair remains capped below a descending trendline and a cluster of moving averages near the 1.3520–1.3515 zone. This region now represents a significant supply zone, where selling pressure has consistently emerged, limiting bullish extensions. Repeated failures within this supply region suggest that institutional sellers remain active, reinforcing downside risks. As long as price remains below 1.3550, rallies are likely to attract renewed selling interest. A decisive break above this area would be required to re-establish bullish control and open the door toward 1.3635 and potentially 1.3800. On the downside, the demand zone between 1.3450 and 1.3430 is acting as the first layer of technical support. This zone aligns with recent lows and a rising trendline from 1.3035, making it a critical area for short-term stabilization. A sustained break below this demand region would expose deeper downside targets near 1.3400. Failure to defend the 1.3400 level would shift market structure decisively bearish, potentially triggering accelerated selling pressure toward the 1.3330 and 1.3250 zones. Such a move would reflect broader risk aversion, reinforced by diverging monetary policies between the Federal Reserve and the Bank of England. Despite the current corrective bias, the broader trend still maintains a cautiously bullish undertone, supported by higher-timeframe demand near 1.3035. However, weakening bullish momentum and persistent rejection from supply zones suggest that consolidation or deeper retracement remains a strong possibility before any sustainable upside can resume. Looking ahead, market focus turns to the upcoming US Producer Price Index data and commentary from Federal Reserve officials. These events could significantly influence short-term volatility and directional bias. In the absence of major UK data, sterling remains highly sensitive to dollar-driven moves and evolving risk sentiment.