GBP/USD Forecast: Focus Returns to US Data

GBP/USD edged modestly higher during the Wednesday morning session as the US dollar eased slightly ahead of key US data releases later in the day. The broader backdrop still favours the dollar after a solid run over recent sessions, which has kept pressure on cable and other major pairs.

The dollar’s rebound has been supported by a combination of mixed US data and firmer oil prices, with geopolitical tensions around Iran, Venezuela and Greenland adding to the risk backdrop. While US CPI printed marginally below expectations, the release failed to materially weaken the dollar. Likewise, news of a Department of Justice probe into Fed Chair Jerome Powell had limited market impact, especially after pushback from Republican lawmakers helped reassure markets about the Federal Reserve’s independence.

Attention now turns squarely to incoming US data, with PPI, retail sales and jobless claims expected to play a larger role in shaping near-term GBP/USD direction.

US PPI, Retail Sales and Policy Risk in Focus

US PPI is due later today, with both headline and core measures expected to rise 0.2% month over month. Retail sales will follow, with markets looking for a 0.5% headline increase and 0.4% on the core measure. Recent data showed consumption growth slowing sharply between September and November, raising concerns about household demand. Seasonal spending may have supported December figures, but confirmation is needed.

Jobless claims and comments from Fed officials later in the week will add further context to the policy outlook. Another potential risk event remains the Supreme Court ruling on Trump-era tariffs. An unfavourable decision could support the dollar by reinforcing trade-related uncertainty.

Pound Pressured by BoE Rate Cut Expectations

On the UK side, GBP/USD continues to be weighed down by expectations that the Bank of England will move toward rate cuts this year. Recent data points to a cooling economy and easing inflation pressures. While a February cut still appears unlikely, March is increasingly viewed as a realistic window, with further easing potentially following in early summer.

Labour market conditions remain a concern for policymakers. Job vacancies have fallen below pre-pandemic levels, redundancies are rising, and wage growth has slowed sharply. Private sector pay growth has dropped from around 6% earlier last year to below 4% by autumn. If this trend persists, services inflation should continue to ease, supported by softer food prices, rents and energy costs. Base effects from last year’s tax changes may also keep headline inflation near 2% from April onwards.

UK monthly GDP, construction output and industrial production data due on Thursday will offer further insight into domestic momentum.

GBP/USD Technical Outlook

From a technical perspective, GBP/USD is starting to look more fragile after failing to sustain gains above the 1.35 area, a long-term resistance zone. The pair has so far managed to hold above the key 1.3400 handle, but bullish momentum has clearly faded.

A sustained move below 1.3400, where the 200-day moving average comes into play, would tilt the outlook toward a deeper corrective phase. In that scenario, the next meaningful support may emerge closer to 1.3220. On the upside, initial resistance is now seen around 1.3460, with stronger resistance remaining at 1.3500.

Outlook Summary

The near-term GBP/USD forecast is increasingly skewed to the downside unless upcoming US data delivers a clear negative surprise. Today’s PPI and retail sales figures, along with jobless claims and legal developments in Washington, will be key short-term drivers. Over the medium term, the pair remains closely tied to the Bank of England’s policy path and the evolving balance between slowing UK growth and easing inflation.