Energy Risks and Safe-Haven Dollar Keep Pressure on GBP/USD

Outlook for GBP/USD is mixed, with the pound facing pressure from rising energy costs, weaker growth expectations, and uncertainty around how the Bank of England will respond to higher inflation. UK inflation is expected to rise toward 3.5% to 4.0%, mainly due to the energy shock, but slowing growth increases the risk of a stagflation environment. While markets are currently pricing possible rate hikes, the more likely scenario is that the BoE pauses and waits for clearer signs of second-round inflation effects, which could limit support for GBP/USD.

At the same time, the US dollar is entering Q2 on a stronger footing due to safe-haven demand, higher oil prices, and reduced expectations for Federal Reserve rate cuts, especially while risks around the Strait of Hormuz remain elevated.

Technically, GBP/USD is trading below the 1.3426 (200-day SMA) with downside risks toward 1.30, which was the low of last year's November. Overall, the near-term bias favours a firmer dollar, though the outlook remains highly sensitive to geopolitical developments and energy prices. If the geopolitical development changes the scenario and if oil supply is restored in the UK, the overall picture for inflation will also change. That is why GBP/USD may return to the upside, and in that case, the upside target for GBP/USD will be the nearest high made on 1st April, which was 1.3345. And after 1.3345, the next resistance may be the 200-day SMA, which is 1.3426

GBP/USD Daily Chart