GBP/USD is trading below 1.35 and is extending its weekly losses. Weaker UK jobs data and narrower yield spreads have reduced support for the pound, as markets reprice expectations for Bank of England easing.
Markets are now focused on Friday’s UK retail sales and preliminary PMI releases. Forecasts point to solid services growth and modest manufacturing expansion. That means any weaker-than-expected readings could weigh on the pair.
Technical Breakdown Signals Further Risk
On the charts, GBP/USD has broken below the 50-day moving average at 1.3529. This increases the risk of a move below the 200-day moving average at 1.3445, and could open the door to a retest of January lows in the mid-1.33s.
The report was produced using an AI tool and reviewed by an editor. The piece is attributed to the FXStreet Insights Team, which compiles market observations from selected experts and analysts.
This follows a familiar pattern: breaking a key moving average often signals weakness in the pound. A similar setup appeared in early 2022, when GBP/USD fell through its 50-day moving average above 1.35 and then dropped sharply. That decline was driven by signs of a weakening UK economy and changing interest rate expectations.
The fundamentals are different now, but the pressure on sterling remains. Then, markets were leaning toward future rate cuts. Now, the Bank of England is staying cautious after January inflation held firm at 3.1%, even as the UK’s Q4 2025 GDP showed zero growth. Sticky inflation alongside a flat economy creates a tough backdrop for the pound.
Dollar Strength And Rate Differentials In Focus
On the US side, recent non-farm payrolls data continues to point to a resilient labor market. That gives the Federal Reserve little reason to ease policy. It supports the US dollar and keeps the UK-US yield spread from turning in the pound’s favor. This dynamic is keeping GBP/USD under pressure.
For traders, this argues for positioning for more downside in GBP/USD, but possibly at a gradual pace. One approach is a bear put spread: buy a put option at one strike and sell another put at a lower strike. This reduces the upfront cost and sets a clear maximum risk. It may suit traders looking for a controlled move lower toward the 1.2500 support area in the coming weeks.
History also shows how quickly sterling can fall when policy risks rise, as seen during the 2022 fiscal crisis. Implied volatility is much lower now than it was then, which makes option strategies cheaper. This can be a way to take a bearish view without paying heavily for protection against extreme moves.
With the UK Spring budget due in March, short-dated put options may also work as a tactical hedge. If fiscal announcements disappoint, GBP/USD could react negatively. This offers a lower-cost way to guard against a sudden drop while watching for a possible retest of the late-2025 lows.
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