The pound has fallen for five consecutive days, nearing its monthly low; be wary of a potential acceleration in the downward trend.
2026-02-20 11:16:54
The pound has remained under pressure against the dollar this week, recording five consecutive days of declines. The current exchange rate is trading below the mid-range of 1.3400, near yesterday's nearly one-month low.
The strong performance of the US dollar has become a major downward pressure. The market is now focused on the upcoming release of the preliminary US fourth-quarter GDP and PCE price index data to determine the Federal Reserve's future interest rate cut path.
Recent robust US data, coupled with the Federal Reserve's cautious stance against excessively rapid easing, has weakened market bets on aggressive rate cuts, causing the dollar to remain volatile at high levels.
In contrast, the pound's fundamentals are weak. The latest UK employment data shows that the unemployment rate rose to 5.2% in the three months to December, while wage growth slowed, indicating weakening momentum in the labor market.
Meanwhile, UK inflation fell to a near one-year low, further reinforcing market expectations for a rate cut at the Bank of England's March meeting.
Diverging policy expectations are the core reason for the relative weakness of the pound: on one hand, the Federal Reserve may maintain high interest rates for a longer period, while on the other hand, the Bank of England faces pressure to ease monetary policy sooner. This shift in interest rate expectations continues to exert structural downward pressure on GBP/USD.
From the daily chart, GBP/USD broke below the 1.3530–1.3520 support zone this week (which has now become resistance), forming a clear technical breakdown. This breach triggered further selling, reinforcing the short-term downtrend.
The current price is trading below the 20-day and 50-day moving averages, which are arranged in a bearish pattern, indicating a weak trend. The MACD is below the zero line and continues to expand, with the momentum bars increasing, suggesting strengthening bearish momentum.
The RSI has fallen below 45 but has not yet entered oversold territory, indicating further downside potential. Key support levels are at 1.3380 and 1.3320; a break below these levels could lead to a further test of 1.3250.
Initial resistance is at 1.3520, followed by the 1.3600 level. Even if weak US data leads to a short-term rebound, unless it can regain a foothold above 1.3520, the rebound is more likely to be seen as a correction rather than a reversal.
Editor's Note:
GBP/USD is currently in a confluence of bearish fundamentals and a technical breakdown. The divergence in monetary policy paths between the US and the UK is the dominant factor, while the technical structure amplifies the downward pressure.
If US GDP and PCE data are strong, the US dollar may rise further, and the pound may continue its decline; if the data is weak, the exchange rate may experience a technical rebound, but the rebound may be limited before policy expectations reverse significantly.
Overall, the pound is likely to record a significant weekly decline this week, and caution should be exercised regarding the risk of amplified volatility due to data releases.
The strong performance of the US dollar has become a major downward pressure. The market is now focused on the upcoming release of the preliminary US fourth-quarter GDP and PCE price index data to determine the Federal Reserve's future interest rate cut path.
Recent robust US data, coupled with the Federal Reserve's cautious stance against excessively rapid easing, has weakened market bets on aggressive rate cuts, causing the dollar to remain volatile at high levels.
In contrast, the pound's fundamentals are weak. The latest UK employment data shows that the unemployment rate rose to 5.2% in the three months to December, while wage growth slowed, indicating weakening momentum in the labor market.
Meanwhile, UK inflation fell to a near one-year low, further reinforcing market expectations for a rate cut at the Bank of England's March meeting.
Diverging policy expectations are the core reason for the relative weakness of the pound: on one hand, the Federal Reserve may maintain high interest rates for a longer period, while on the other hand, the Bank of England faces pressure to ease monetary policy sooner. This shift in interest rate expectations continues to exert structural downward pressure on GBP/USD.
From the daily chart, GBP/USD broke below the 1.3530–1.3520 support zone this week (which has now become resistance), forming a clear technical breakdown. This breach triggered further selling, reinforcing the short-term downtrend.
The current price is trading below the 20-day and 50-day moving averages, which are arranged in a bearish pattern, indicating a weak trend. The MACD is below the zero line and continues to expand, with the momentum bars increasing, suggesting strengthening bearish momentum.
The RSI has fallen below 45 but has not yet entered oversold territory, indicating further downside potential. Key support levels are at 1.3380 and 1.3320; a break below these levels could lead to a further test of 1.3250.
Initial resistance is at 1.3520, followed by the 1.3600 level. Even if weak US data leads to a short-term rebound, unless it can regain a foothold above 1.3520, the rebound is more likely to be seen as a correction rather than a reversal.
Editor's Note:
GBP/USD is currently in a confluence of bearish fundamentals and a technical breakdown. The divergence in monetary policy paths between the US and the UK is the dominant factor, while the technical structure amplifies the downward pressure.
If US GDP and PCE data are strong, the US dollar may rise further, and the pound may continue its decline; if the data is weak, the exchange rate may experience a technical rebound, but the rebound may be limited before policy expectations reverse significantly.
Overall, the pound is likely to record a significant weekly decline this week, and caution should be exercised regarding the risk of amplified volatility due to data releases.
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- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
