LONDON, January 15, 2026 — The British pound traded around 1.3430 USD on Thursday, gaining ground yesterday after surprisingly robust UK economic growth figures. These numbers could significantly influence expectations for future policy decisions from the Bank of England.
Pound Strengthens Amid Shifting Economic Outlook
Table of Contents
Sterling’s recent gains are tempered by global uncertainties and questions about the pace of UK economic recovery.
- Since the start of January, the pound has shown limited progress against the US dollar but has strengthened against the euro.
- Investor sentiment towards the pound has improved, with traders reducing bearish bets at the fastest rate in five months.
- While UK inflation eased towards the end of 2025, analysts are skeptical about predictions of multiple Bank of England rate cuts this year.
- Key economic data releases next week, including inflation and labor market figures, will be crucial in determining the pound’s trajectory.
Since January 1st, sterling has made modest gains against the dollar, but has seen a more noticeable increase in value against the euro. However, dollar sentiment remains cautious, influenced by geopolitical tensions involving Iran and Greenland, as well as recent comments from President Donald Trump raising concerns about the Federal Reserve’s independence.
Investor confidence in the pound has become more positive at the beginning of 2026. Data from the US Commodity Futures Trading Commission (CFTC) reveals that traders decreased their short positions on the pound at the quickest pace in five months during the first week of January. The net long dollar position against sterling fell sharply to 2.577 billion USD, down from 6.586 billion USD at the end of December – the largest weekly decline since September 2019.
Inflation in the UK eased faster than anticipated towards the close of 2025, leading markets to currently anticipate two rate cuts by the Bank of England this year. However, analysts suggest this outlook is overly optimistic, arguing that persistently sluggish growth and subdued inflation could ultimately weigh on the currency. Upcoming employment and inflation data for December will be critical in reassessing the possibility of a rate cut as early as February, although current market expectations assign a low probability to such a move.
Next week’s economic calendar includes the release of consumer price data and labor market statistics, culminating in GDP figures on Thursday. A Reuters poll indicates that the UK economy contracted by 0.2% in the three months leading up to November, with annual growth estimated at approximately 1.1%.
Technical Analysis: GBP/USD
H4 Chart:
The 4-hour chart shows GBP/USD forming a broad consolidation range around 1.3455 USD. This range is expected to extend towards 1.3395 USD, followed by a corrective bounce to 1.3415 USD. After that, the downtrend could resume towards 1.3290 USD, with potential for further declines to 1.3220 USD. The MACD indicator supports this bearish short-term outlook, as its signal line is below zero and trending downward.
H1 Chart:
On the 1-hour chart, the pair has established a tight consolidation range around 1.3440 USD. A downward movement towards 1.3395 USD is currently underway, and a break below this level could open the door to further declines towards 1.3290 USD. The Stochastic oscillator reinforces this view, with its signal line below 20 and trending lower, indicating sustained selling momentum.
What factors could trigger a significant shift in the GBP/USD exchange rate? Key economic data releases and evolving expectations regarding Bank of England policy are likely to be the primary drivers.
Despite improving sentiment and a substantial reduction in speculative short positions, the pound remains susceptible to downside risks stemming from domestic data and shifting Bank of England expectations. Technically, the pair maintains a near-term bearish bias, with crucial support levels at 1.3395 USD and 1.3290 USD. A breach of these levels could accelerate declines, while any sustained recovery would likely require stronger-than-expected UK data in the coming week.
