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STORY LINK Pound Sterling to Dollar Forecast: GBP Stalls Below 1.35 as USD Holds Firm

The Pound to Dollar exchange rate has been unable to regain ground above 1.35, as geopolitical developments and global risk considerations continue to dominate trading.

With UK fundamentals taking a back seat, GBP/USD remains range-bound while markets await clarity on US policy risks.

GBP/USD Forecasts: Held Below 1.3500

The Pound to Dollar (GBP/USD) exchange rate has been unable to move back above the 1.3500 level and settled around 1.3470 after the New York open.

Ranges have been relatively contained despite major underlying concerns and uncertainties.

Geo-political stresses remain substantial, especially with markets waiting for President Trump’s response on the Iran situation.

Overnight Trump threatened to impose 25% tariffs on countries which trade with Iran which is liable to trigger fresh tensions with China.

The overall dollar performance has been mixed while there has been further demand for precious metals with gold and silver posting fresh record highs. There have not been any major UK developments ahead of the latest UK GDP data on Thursday.

Monex Europe head of macro analysis Nick Rees commented; “It’s less to do with UK fundamentals – which we still think are weak – it’s rather that events elsewhere are providing a distraction from Britain’s problems.”

UoB commented; “The price action suggests that GBP is likely in a range-trading phase, probably between 1.3390 and 1.3520.”

MUFG expects limited GBP/USD gains to 1.38 at the end of 2026.

The headline US inflation rate was unchanged at 2.7% for December and in line with consensus forecasts. Core prices increased 0.2% on the month with the annual rate holding at 2.6% compared with market expectations of a slight uptick to 2.7%.

Markets are pricing in less than a 30% chance of a March Fed rate cut after no change in January, limiting scope for dollar selling.

There is still a high degree of concern surrounding Fed independence, although the market impact has been limited.

Traders are waiting for further news on the legal action against Chair Powell and the choice of next Fed Chair.

Scotiabank commented; “As President Trump continues to mull his pick to replace Powell, investors appear surprisingly calm in the face of the apparent risks facing the Fed’s policy independence.”

Domestically, markets will be on alert for comments from Bank of England (BoE) officials.

Deputy Governor Ramsden and external member Taylor are due to speak on Wednesday.

Both members have been relatively dovish members on the committee and the Pound will be vulnerable if Ramsden backs another immediate rate cut.

According to Scotiabank, there is scope for the disappointment surrounding central bank policy; “BoE rate expectations are steady following their recent pullback with markets still pricing at least one 25bpt cut by June and nearly 50bpts by December. We see risks titled to less easing than what is currently priced and look to GBP support as markets pare back their expectations for cuts.”

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TAGS: Pound Dollar Forecasts

Created on January 14, 2026

The US dollar has rallied quite nicely during the trading session on Tuesday to break well above the 158 yen level. At this point, the “carry trade” is still alive and well.

The US dollar has rallied quite nicely during the trading session on Tuesday to break well above the 158 yen level. In fact, as I write the article, we are now above the 159 yen level. If we get some type of short-term pullback, then that opens up the possibility of buying value. The 158 yen level is an area that I think is going to be a short-term support level, as it was previously resistance.

Market Outlook and Potential Intervention

The 160 yen level is an area that I think could cause some issues, as the Bank of Japan had previously intervened in the market, as the market got a little overstretched previously. That being said, if we could break above the 160 yen level, then we could continue to go higher. As long as we stay above the 155 yen level, I think we have a good chance that anytime we pull back, you should be a buyer.

If we were to break down below the 155 yen level, then it’s open up to a move down to the 200-day EMA, but I don’t expect to see that happen. After all, this is a positive swap situation as the market is going to pay you at the end of every day, and therefore, the carry trade is still a very real thing. I believe that the Bank of Japan is essentially stuck with loose monetary policy, while the Federal Reserve could cut rates. The reality is they cut rates once or twice this year, and that still means that the US dollar should offer more value than the Japanese yen, all things being equal.

Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out.

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.

The GBPJPY pair took advantage of the positive factors that begin by the main stability within the bullish channel’s levels and surpassing extra barrier at 212.75, besides providing bullish momentum by the main indicators, to resume the bullish attack and recording the previously suggested initial target by hitting 214.30 level.

The price might need a chance to catch its breath and provide some sideways trading, to gain new bullish momentum, opening the way for reaching new bullish stations that might begin at 214.55 reaching %2.236 Fibonacci extension level near 214.90.

The expected trading range for today is between 213.35 and 214.55

Trend forecast: Bullish

Created on January 13, 2026

The Euro has peaked above the swing high during the trading session here on Tuesday as the Japanese yen continues to struggle overall.

The Euro has peaked above the swing high during the trading session here on Tuesday against the Japanese Yen, and it does look to me like a market that is probably going to continue to find plenty of buyers. This is not necessarily a situation where I love the Euro; I just think the Japanese Yen is going to continue to be that weak.

We have been in a nice uptrend in all of the yen-denominated pairs for some time now, and one thing that you could look at on this chart, at least in the sense of whether or not you should trade this pair, is that at least you avoid the US dollar. There are a lot of questions about the US dollar at the moment.

Bank of Japan Policy and the Carry Trade

That being said, the one thing that’s not a question is that the Japanese Yen continues to weaken, and I think there are a lot of problems in Japan that will continue to show themselves in the currency markets. Traders continue to look at the Bank of Japan and recognize that they can’t tighten policy too much.

And while the European Central Bank isn’t necessarily going to make big moves going forward, as we are essentially where we need to be there, the reality is that the Bank of Japan is going to have a problem where it cannot raise rates enough to avoid the carry trade.

I think this is a big situation where looking at the Japanese Yen as a funding currency and continuing the overall carry trade is going to appear in this pair as well as many others. I believe that as long as we can stay above the 50-day EMA, this is a strong market that could continue much higher, possibly even as high as 188 Yen.

Begin trading our daily forecasts and analysis. Here is a list of Forex brokers in Japan to work with.

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 January 13, 2026

The Euro has peaked above the swing high during the trading session here on Tuesday as the Japanese yen continues to struggle overall.

The Euro has peaked above the swing high during the trading session here on Tuesday against the Japanese Yen, and it does look to me like a market that is probably going to continue to find plenty of buyers. This is not necessarily a situation where I love the Euro; I just think the Japanese Yen is going to continue to be that weak.

We have been in a nice uptrend in all of the yen-denominated pairs for some time now, and one thing that you could look at on this chart, at least in the sense of whether or not you should trade this pair, is that at least you avoid the US dollar. There are a lot of questions about the US dollar at the moment.

Bank of Japan Policy and the Carry Trade

That being said, the one thing that’s not a question is that the Japanese Yen continues to weaken, and I think there are a lot of problems in Japan that will continue to show themselves in the currency markets. Traders continue to look at the Bank of Japan and recognize that they can’t tighten policy too much.

And while the European Central Bank isn’t necessarily going to make big moves going forward, as we are essentially where we need to be there, the reality is that the Bank of Japan is going to have a problem where it cannot raise rates enough to avoid the carry trade.

I think this is a big situation where looking at the Japanese Yen as a funding currency and continuing the overall carry trade is going to appear in this pair as well as many others. I believe that as long as we can stay above the 50-day EMA, this is a strong market that could continue much higher, possibly even as high as 188 Yen.

Begin trading our daily forecasts and analysis. Here is a list of Forex brokers in Japan to work with.

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.

GBP/USD Technical Analysis

The British pound, of course, is looking very much like a market that is going to respect the 1.35 level as a magnet for price, but also for a barrier that extends possibly all the way to the 1.36 level.

With this being the case, I think you look at short-term rallies that show signs of exhaustion, like we are seeing early in the day, as a potential selling opportunity. I do believe the US dollar is turning the corner, and with that being the case, you have to look at this through the prism of a market that you are fading as it shows signs of exhaustion. If we break above the 1.36 level, that invalidates everything.

EUR/GBP Technical Analysis

The euro continues to drift lower against the British pound, but we’re sitting right here at the 200-day EMA. It’ll be interesting to see if we can break down below there, because if we do, I think it opens up the door to 0.86, and then after that, much lower, maybe 0.84.

This is not a quick-moving pair, but when you look at the euro against the dollar, and you look at the British pound against the dollar, you can definitely see that the British pound is less bad. And that’s what I’m trading here. The ECB is already pretty low with its rates, and it’s not going to do anything, but the Bank of England, despite the fact that it just cut its rates, looks very much like it’s going to be hesitant to do so aggressively. I still like the downside here; I like fading rallies; I like shorting this pair below the 200-day EMA.

If you’d like to know more about trading major macro events like FOMC, CPI, and NFP, please visit our educational area.

Created on January 13, 2026

The British pound has rallied Monday as the Department of Justice announced it was investigating Jerome Powell. However, we see the same resistance area.

• The excuse this morning was that the Department of Justice is looking at Federal Reserve Chairman Jerome Powell, and that had the markets nervous.
• Anytime you start to see politics played with major participants, they do not like that.
• At this point though, the reality of the situation is whether or not he gets indicated really does not matter. He will not be the Federal Reserve Chairman by the time anything would happen, and I think that is what you are starting to see the markets come to grips with.

The reality is it really does not change anything. With that being the case, the 1.3550 level continues to be significant resistance and I am looking for signs of exhaustion to start shorting. I do believe that we are starting to see that in short-term charts.

A Market Stuck in a Familiar Range

I am not looking for a big move to the downside; in fact, I think the 50-day EMA at the 1.3372 level continues to offer a floor. As a result, I think this is a short-term back and forth type of setup. But when I look at the longer-term charts, it is worth noting that despite the volatility, we are at the same place we were at in June.

Although it has been exhausting to trade this pair at times, the reality is nothing has changed. We have made a series of lower highs though, and that might be something looked at through the lens of a longer-term trader. If we break down below the 1.33 level, I think at that point in time the bottom falls out and it would not surprise me if that ends up being the case. Keep in mind that the British pound has outperformed its peers against the US dollar both up and down over the last couple of years and I think that will probably continue to be the case.

Ready to trade our daily GBP/USD Forex forecast? Here’s some of the best forex broker UK reviews to check out.

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.