GBP/USD Outlook: Pound Under Pressure After Weak UK Labor Data

The unemployment rate rose from 5.1% to 5.2%, reaching its highest level in more than a decade (excluding the COVID-19 pandemic period). The number of unemployed increased by 94.0 thousand on a quarterly basis to 1.883 million, while employment growth slowed from 82.0 thousand to 52.0 thousand. Average wage growth came in at 4.2% versus expectations of 4.6%, while the same indicator excluding bonuses fell from 3.6% to 3.4%. In real terms, wage growth amounted to just 0.5–0.8%, indicating preserved purchasing power but no additional inflationary pressure. Overall, the labor market shows signs of cooling, which could support the Bank of England’s continuation of a dovish stance. Investors now assign a 70.0% probability to a 25-basis-point rate cut at the March meeting, compared with much lower expectations prior to the data release.

Inflation data due today at 09:00 (GMT+2) are expected to play a key role in shaping policy rhetoric. The consensus forecast points to a slowdown in annual CPI to 3.0% from 3.4% in December, marking the lowest level since September 2024 and bringing inflation closer to the Bank of England’s 2.0% target. A sustained disinflation trend would provide the Monetary Policy Committee with justification to return to policy easing to support economic activity. Core CPI, which excludes volatile food and energy components, is expected to slow from 3.2% to 3.1%, remaining near 2021 lows.

Meanwhile, a group of leading UK financial institutions is intensifying efforts to create a national payment infrastructure that could serve as an alternative to Visa Inc. and Mastercard Inc., amid rising concerns over strategic risks linked to potential external geopolitical pressure on critical financial infrastructure. The project, provisionally named DeliveryCo and overseen by Barclays UK CEO Vim Maru, involves establishing a new legal entity, developing corporate governance structures, capital-raising mechanisms, and an operating model independent of U.S. providers. According to the Payment Systems Regulator, around 95.0% of all UK card transactions are processed via Visa and Mastercard, creating systemic risks should access to these services be disrupted. Technological solutions prepared by the Bank of England are expected to be handed over to participating institutions for long-term integration by 2030.

At the same time, pressure on the U.S. dollar comes from Friday’s inflation data: in January, CPI slowed to 0.2% month-on-month versus expectations of 0.3%, and fell from 2.7% to 2.4% year-on-year against a forecast of 2.5%. Core inflation rose from 0.2% to 0.3% month-on-month and eased from 2.6% to 2.5% year-on-year, in line with estimates. These figures, together with signs of a cooling labor market, have formed a solid basis for expectations of a renewed monetary easing cycle in the second half of the year. According to the CME FedWatch Tool, investors are pricing in two or even three rate cuts, with the probability of the first move in June estimated at around 52.0%, while the likelihood of rates remaining in the 3.50–3.75% range at the March 18 meeting stands at 90.2%.

Support and resistance levels

On the daily chart, Bollinger Bands show a confident downward slope, with the price range narrowing and noticeably limiting the development of the bearish trend in the very short term.

The MACD maintains a strong sell signal, remaining below the signal line and preparing to test the zero level on a downside break. The Stochastic Oscillator shows a similar dynamic and is currently hovering around the 20 level, signaling rising risks of short-term oversold conditions for the pound.

Resistance levels: 1.3600, 1.3650, 1.3700, 1.3750.

Support levels: 1.3550, 1.3500, 1.3455, 1.3418.

Trading scenarios and GBP/USD outlook

Long positions can be opened after a confident breakout above 1.3600, targeting 1.3700. Stop-loss: 1.3550. Time horizon: 2–3 days.

A resumption of the downward move with a subsequent break below 1.3500 could signal new short positions with a target at 1.3390. Stop-loss: 1.3550.