- The GBP/USD weekly forecast turns strongly bullish as the dollar loses traction amid geopolitics.
- The upbeat UK CPI, retail sales, and PMI data provided adequate support to the pair.
- Markets await the FOMC rate decision and press conference next week.
GBPUSD ended last week with sterling fundamentals improving, but price action still leaned heavily on USD headline risk and US rate expectations.
In the UK, inflation re-accelerated as CPI rose 3.4% YoY in December (from 3.2%), which typically reduces the market’s confidence in rapid BoE easing and helped GBP on the day by lifting front-end UK yields. Activity and demand data also surprised positively: UK retail sales rose 0.4% MoM in December (versus expectations for a fall), adding to signs of a pickup and supporting sterling sentiment, even if the FX follow-through was at times modest.
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The UK flash PMI set added to the constructive tone by signalling continued expansion in private-sector activity, reinforcing the idea that the UK economy is not rolling over into the BoE’s subsequent decisions.
On the US side, “good” data didn’t translate into a stronger dollar because geopolitics dominated. The US economy’s momentum was confirmed as Q3 2025 GDP was revised up to a 4.4% annualized pace, and business surveys stayed expansionary with the S&P Global flash PMIs showing manufacturing at 51.9 and composite at 52.8 in January.
At the same time, tensions between the US and Europe over Greenland added to volatility in the risk premium. Trump said he would impose 10% tariffs on eight European countries under pressure from Greenland. Later, he also said that a “framework” had been talked about after meeting with NATO Secretary General Mark Rutte. Denmark and Greenland both stated that their sovereignty is not negotiable. That mix made the markets jumpy and hurt steady demand for the USD.
In the next week, there won’t be any big UK releases, so the tape will lead. So, GBPUSD should mostly trade like a Fed-week USD cross, reacting to changes in US yield expectations and any new geopolitical or tariff news.
If the Fed is hawkish, the USD can be stronger than the improving data pulse of the GBP. Conversely, if the Fed stays balanced and yields fall, the GBP can hold up better than its peers, given last week’s hotter CPI and stronger activity signals.
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GBP/USD Weekly Technical Forecast: Bullish Above 1.3565
The GBPUSD daily chart shows a strong bullish candle piercing the 1.3565 resistance level, followed by the 1.3600 psychological mark. However, the RSI approaching the overbought region indicates a potential pullback to the 1.3565 area before an upside continuation.
The upside target for the pair lies at 1.3700, ahead of 1.3750. On the downside, if the price breaks and stays below the 1.3565 level could gather further selling pressure and drag towards 1.3500.
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