– Written by


Frank Davies

STORY LINK Pound to Dollar Forecast: GBP Under Pressure as BoE Signals Cuts Ahead

The Pound to Dollar exchange rate (GBP/USD) has come under renewed pressure as a knife-edge Bank of England decision collides with rising UK political uncertainty, reviving downside risks for Sterling just as markets begin to price earlier interest-rate cuts.

A sharply divided Monetary Policy Committee and leadership speculation surrounding Prime Minister Starmer have unsettled investors, leaving GBP/USD vulnerable near key support levels amid broader FX volatility.

GBP/USD Forecasts: 10-Day Low

The Pound to Dollar (GBP/USD) exchange rate was subjected to heavy losses after the Thursday open amid UK political fears.

After a tentative recovery, there was a fresh U-turn following a dovish Bank of England policy decision with GBP/USD sliding to 10-day lows below 1.3550 before a recovery to 1.3590 as wider FX volatility spiked.

ING commented; “Today’s dovish communication from the BoE has added to a softer pound – already under pressure from local politics.”

A sustained break below the 1.3550-70 support area would risk further losses.

The dollar secured wider gains amid weaker equities, but then retreated after a higher than expected figure for US jobless claims.

ING pointed to underlying market stresses; “A burgeoning sell-off in US tech stocks and ongoing volatility in the metals markets are providing many cross-currents for FX.”

The Bank of England (BoE) Monetary Policy Committee (MPC) held interest rates at 3.75% following the latest policy decision, in line with strong consensus forecasts.

There was, however, a very narrow 5-4 vote for the decision as Dhingra, Taylor, Ramsden and Breedon voted for a further 25 basis-point cut to 3.50%.

The majority commented that further evidence was needed on wages and inflation before having confidence in another cut.

Bailey and Mann, however, had greater confidence in the inflation outlook which suggested that they were very close to backing a cut at this meeting.

According to the dissenters, inflation risks had declined further and that policy was too restrictive which justified a further cut.

There was some relief in the bond market with the 10-year yield retreating to around 4.53% from 4.58% earlier in the session.

Following the decision, markets are pricing in 50 basis points in cuts this year compared with 35 basis points ahead of the latest decision.

According to MUFG; “It certainly looks like we could get a cut as early as the next policy meeting.”

Danske Bank Analyst Kirstine Kundby-Nielsen commented; “I think it will be pretty tight whether it will be a March or April cut, but I think the point is that, prior to this it was priced that we would see only one more cut, but now two could definitely be in play.”

According to Schroders senior economist George Brown; “Today’s rate decision was seen as a foregone conclusion, but the Bank’s close vote to hold rates suggests cuts are not a matter of if, but when.”

He sees scope for Governor Bailey to back one or two cuts over the next few months.

Nevertheless, he added; “However, the Bank will have to act soon if it intends to cut, before that window closes and the opportunity for further easing slams shut in the second half of the year.”

Political difficulties for Prime Minister Starmer have also undermined the Pound amid concerns over a challenge on Starmer which could jeopardise the position of Chancellor Reeves.

BBH commented; “GBP and gilts plunged, driven by UK political uncertainty. Prime Minister Keir Starmer is facing intense leadership speculation over his decision to appoint Peter Mandelson as US ambassador, despite knowing about his connection to Jeffrey Epstein.”

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TAGS: Pound Dollar Forecasts

The EURJPY pair provided several weak sideways trading, delaying the bullish trend due to its stability below 185.45 barrier, to form some mixed trading by reaching 184.35 level.

Note that stochastic exit from the overbought level might increase the negative pressures on the trading, forcing it to provide negative corrective trading, to target 183.85 level reaching the bullish channel’s support at 183.20, while breaching the barrier and holding above it will reinforce the chances of recording extra gains that might begin at 186.20.

The expected trading range for today is between 183.85 and 185.40

Trend forecast: Fluctuating within the bullish trend

The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.

Pound Sterling gave in to the USD resurgence

GBP/USD faced a double whammy during the week, with resurgent haven demand for the US Dollar (USD) on one hand. While the dovish Bank of England (BoE) interest rate on hold decision smashed the pair on the other hand.

In doing so, the pair reversed a majority of gains seen from the beginning of this year, extending the correction from over four-year highs of 1.3869 reached on January 27.

The Greenback attracted haven demand as markets embarked on a solid rotation spree, with capital flowing out of overvalued and growth assets, such as tech stocks, Gold, Silver etc., into value assets and undermined ones like the USD.

Markets resorted to ‘sell-everything’ mode as the AI rout deepened, boosting the USD recovery against its six major currency rivals. The end of the partial government shutdown on Tuesday also helped the buck maintain its ground, despite a slew of weak US labor data and concerns over the US Federal Reserve’s (Fed) monetary policy outlook under the leadership of Kevin Warsh.

The Automatic Data Processing (ADP) Research Institute said on Wednesday, private sector employment in the US rose 22,000 in January, against a forecast of 48,000. Meanwhile, Initial claims for ‌state unemployment benefits jumped 22,000 to a seasonally adjusted 231,000 for the week ended January 31, the ‌Labor Department said on Thursday.

“The US December JOLTS report shows a steep drop-off in job openings to 6.54 million from a downwardly revised 6.93 million level in November,” according to ING Bank.

In the second half of the week, the dovish BoE storm pounded the Pound Sterling further. The UK central bank kept interest rates on hold at 3.75% in February.

The BoE nine-member Monetary Policy Committee (MPC) voted by a slim 5:4 majority to keep rates steady. Four members voted to lower rates. 

Expectations of a sharp drop in inflation in the coming months also added to the dovish BoE outlook, fueling bets for a rate cut as early as next month.

 Key US and UK economic data to watch out for

In light of the dovish tilt, the focus is now on a series of speeches from BoE policymakers, with Governor Andrew Bailey’s appearance late Sunday eagerly awaited.

A slew of Fed and BoE officials are also set to speak on Tuesday, with Monday being a data-light day.

Tuesday will also feature the US Retail Sales report and the quarterly Employment Cost Index.

On Wednesday, the delayed US January jobs data will be published, with key focus on the headline Nonfarm Payrolls print.

The quarterly and monthly Gross Domestic Product (GDP) data will be released from the United Kingdom (UK) on Thursday, followed by the US Jobless Claims data.

On Friday, BoE Chief Economist Huw Pill will participate in a fireside chat at an event hosted by Santander Bank in London ahead of the critical US Consumer Price Index (CPI) inflation report.

Besides these economic events, geopolitics will continue to grab attention amid US President Donald Trump’s erratic international policies.

GBP/USD Technical Analysis

The 21-, 50-, 100- and 200-day Simple Moving Averages (SMA) all rise, with the shorter ones positioned above the longer, reinforcing buyers’ control. Price holds above these markers, with the 21-day SMA at 1.3564 offering nearby dynamic support. The Relative Strength Index (RSI) stands at 51 (neutral) and has edged higher, hinting stabilizing momentum. Measured from the 1.3346 low to the 1.3868 high, the 61.8% retracement at 1.3545 offers a floor, while the 50.0% retracement at 1.3607 is the level bulls would seek to reclaim to extend the advance.

Shorter SMAs continue to advance over the medium-term ones, and the broader set trends higher, underpinning an upward bias. The pair trades above the 50-day SMA at 1.3475 and the 200-day SMA at 1.3430, keeping dip-buying interest intact. RSI near 51 remains neutral; a firm move above 60 would strengthen the upside impulse. On setbacks, the 100-day SMA at 1.3379 would serve as the next layer of support.

(The technical analysis of this story was written with the help of an AI tool.)

Created on February 06, 2026

• The US dollar tried to rally against the Japanese yen early on Thursday, however, we have since seen a bit of exhaustion.

The US dollar tried to rally against the Japanese yen early on Thursday but has turned around to show signs of exhaustion. That’s not a huge surprise though because quite frankly we have been straight up in the air for a while and it does make a certain amount of sense that sooner or later sellers come in and push the market back down and of course buyers run out of momentum and new buyers to join them.

That being said this is a market that still favors the upside as far as an interest rate differential argument is concerned and with that being said short term pullbacks, I think are going to end up being buying opportunities. The 50-day EMA is going to offer support underneath and then after that we could talk about the 155-yen level.

Market Memory and Technical Support

The 158 yen level above is a significant target over the longer term and it’s an area that I think probably will have a lot of market memory attached to it because we had some type of intervention there but all things being equal any pullback from here probably offers a little bit of buying opportunity with the 200-day EMA perhaps being the absolute floor.

I don’t have any issue whatsoever in buying this pair on a pullback that bounces because not only do I get paid at the end of every day, but the overall uptrend still is strong. If we can break out above the recent swing high, then the 160-yen level becomes a very important level.

Keep in mind this is an area that’s significant on the monthly chart going back decades that we had just pulled back from so a couple of attempts before we can finally break out would not be a huge surprise to me at all. Regardless I don’t have any interest in buying the yen so I’m looking for buying opportunities here.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

Created on February 06, 2026

• The Euro has been slightly negative during fairly quiet trading on Thursday, as the ECB rate decision has come and gone.
• At this point, the market looks like it is ready to make a decision.

The Euro has been slightly negative during fairly quiet trading on Thursday despite the fact that we had an ECB decision. Ultimately, not much changed. That is not a huge surprise because quite frankly, that is what we had anticipated. So, we are just hanging around the 1.18 level, and we will have to look through this market through the prism of what the US dollar is doing.

During the trading session, it has been a touch stronger against Europe and a touch weaker against Asia—at least some Asia. So, with that being said, I think we have a potential for a move to the upside on any type of momentum breaking above the 1.1850 level.

Binary Choice for Momentum

If we break above there, then the 1.20 level would be the target. If we break down from here, then we will test the 50-day EMA. If we were to break down below the 50-day EMA, then it opens up the Euro to go to the 1.16 level, which is just sitting right around the 200-day EMA.

We are essentially in the middle of a binary choice like this, so that being said, if we see some type of momentum, I think we have a couple of targets ahead of us based on those. We will have to wait and see how Friday plays out, but as things stand right now, we still have a situation where we broke out of consolidation, we pulled back to retest that previous resistance. Now the question is, will we find buyers to push this thing to the upside?

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.