The Pound Sterling (GBP) failed to resist at higher levels against the US Dollar (USD), but buyers held their ground amid a US data-busy blockbuster week.
Pound Sterling showed resilience
GBP/USD managed to build on its late last week’s rebound from ten-day lows of 1.3509 in the first half of the week before running into strong offers at around the 1.3700 region.
Renewed weakness in the USD helped the pair scale a five-day peak near 1.3710, as the continued USD/JPY downside outweighed a positive surprise in the January Nonfarm Payrolls (NFP) report from the United States (US).
The Greenback reeled from the ‘rub-off’ effect of the relentless Japanese Yen (JPY) buying, fueled by Japan’s Prime Minister (PM) Sanae Takaichi’s landslide victory in the snap elections and looming forex intervention risks.
Additionally, increased dovish expectations surrounding the US Federal Reserve (Fed) interest rate cut outlook exerted downward pressure on the buck, aiding the pair’s rebound.
However, unexpectedly strong US labor data released on Wednesday helped the USD cut its losses, prompting a decent pullback in GBP/USD toward the 1.3600 demand area.
US Nonfarm Payrolls (NFP) in January increased by 130,000, much higher than the estimated figure of 70,000. The Unemployment Rate unexpectedly ticked down to 4.3% from 4.4% in December 2025.
The blockbuster jobs data almost priced out a March Fed rate cut, while slightly scaling back the odds for a June rate reduction, according to the CME Group’s FedWatch Tool.
Further, the Pound Sterling faced headwinds from renewed UK economic concerns after data published by the Office for National Statistics (ONS) showed on Thursday that Gross Domestic Product (GDP) rose by a meagre 0.1% in the fourth quarter of 2025, undermining the estimated 0.2% growth.
This, combined with the simmering UK political tensions, supported GBP/USD sellers in the latter part of the week.
British PM Keir Starmer’s position seemed to be on shaky ground after disclosures linked to the Epstein files triggered intense criticism of Starmer’s appointment of Peter Mandelson as the UK’s ambassador to the US, prompting senior resignations and fuelling speculation about the PM’s political survival.
On Friday, the US Bureau of Labor Statistics announced that annual inflation in the US, as measured by the change in the Consumer Price Index (CPI), declined to 2.4% in January from 2.7% in December. This print came in below the market expectation of 2.5% and limited the USD’s gains heading into the weekend, allowing GBP/USD to stabilize above 1.3600.
Week ahead: UK jobs and inflation on tap
After the delayed data deluge from the US, it’s time for the UK fundamentals to garner attention in a holiday-shortened week.
The US markets are closed on Monday in observance of Presidents’ Day. Also, Chinese traders will be away the entire week, celebrating the Lunar New Year.
Therefore, thin trading conditions are likely to persist in the early part of the week, which could exaggerate GBP/USD moves.
Tuesday will feature the UK employment data, while the US calendar remains data-light that day.
The British CPI inflation data will ramp up volatility on Wednesday ahead of the Minutes of the Fed’s January monetary policy meeting due later in the day. A couple of mid-tier data, including the Durable Goods Orders and Housing Starts, will also be published on Wednesday.
The UK CPI report could reaffirm expectations of a March rate cut by the Bank of England (BoE), significantly impacting the Pound Sterling’s valuation.
On Thursday, the usual weekly US Jobless Claims will be reported, followed by the Pending Home Sales report.
Friday sees a busy end to the week, with a raft of preliminary Manufacturing and Services PMI data on the cards from both sides of the Atlantic.
However, the advance estimate of the fourth-quarter US GDP will steal the limelight alongside the publication of the Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge.
Besides, speeches from the Fed and BoE officials will also be closely followed amid hopes for a second round of talks between the US and Iran as negotiations intensify over curbing the latter’s nuclear weapons programme.
GBP/USD Technical Analysis
The 21- and 50-day Simple Moving Averages (SMA) advance, with the 21-day above the 50-day, while price holds above the 50-, 100- and 200-day SMAs. The 100-day SMA rises but remains beneath the 200-day, suggesting a steady medium-term improvement. The Relative Strength Index (RSI) stands at 53, neutral, and edging higher, reinforcing a balanced bullish tone.
Measured from the 1.3346 low to the 1.3868 high, the 50% retracement at 1.3607 offers nearby support, with the 61.8% retracement at 1.3545 as a deeper floor. A firm hold above the 21-day SMA at 1.3618 would keep the bias tilted upward, whereas a close below 1.3545 would dent momentum and shift risk back into consolidation.
(The technical analysis of this story was written with the help of an AI tool.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
