GBP/USD is trading below 1.35 and has extended weekly losses. Weaker UK jobs data and narrower yield spreads have reduced support, as markets have repriced expected Bank of England easing.
Attention is on Friday’s UK retail sales and preliminary PMI releases. Current expectations include solid services growth and modest manufacturing expansion, which leaves room for weaker-than-expected outcomes to impact the pair.
Technical Breakdown Signals Further Risk
On the charts, GBP/USD has broken below the 50-day moving average at 1.3529. This sets up the risk of a move below the 200-day moving average at 1.3445 and a retest of January lows in the mid-1.33s.
The report was produced using an AI tool and reviewed by an editor. The piece is attributed to the FXStreet Insights Team, which compiles market observations from selected experts and analysts.
We are seeing a familiar pattern where a break of a key moving average is signaling weakness for the pound. This echoes the setup we saw in early 2022 when GBP/USD broke its 50-day moving average above 1.35, leading to a significant decline. That move was driven by signs of a weakening UK economy and shifting interest rate expectations.
Today, the fundamental picture is different, though the pressure on the pound remains. While back then markets were pricing in future rate cuts, now the Bank of England is holding firm due to January’s stubborn inflation figure of 3.1%, even as the UK’s Q4 2025 GDP showed zero growth. This combination of sticky inflation and economic stagnation is creating a difficult environment for sterling.
Dollar Strength And Rate Differentials In Focus
On the other side of the pair, recent US non-farm payroll data continues to show a resilient labor market, giving the Federal Reserve little reason to consider easing policy. This strengthens the US dollar and keeps the yield spread between UK and US government bonds from favoring the pound. The current dynamic is holding GBP/USD down in the mid-1.26s.
For traders, this suggests positioning for further, but perhaps gradual, downside in GBP/USD. A bear put spread could be an effective strategy, which involves buying a put option at a specific strike price while selling another put at a lower strike. This approach limits the upfront cost and defines your risk, making it ideal for profiting from a moderate drift down towards the 1.2500 support level over the coming weeks.
Looking at historical data, the sharp drop in sterling during the 2022 fiscal crisis shows how vulnerable the currency is to policy missteps. Current implied volatility is much lower than it was during that period, making options strategies cheaper to implement. This presents an opportunity to build bearish positions without overpaying for protection against extreme market moves.
With the UK Spring budget approaching in March, short-dated put options could serve as a tactical hedge. Any disappointing fiscal announcements could trigger a negative reaction. This strategy provides a cost-effective way to protect against a sudden drop while we watch for a potential retest of the lows from late 2025.
