Market Overview: Pound Faces Weekly Decline Amid Geopolitical Uncertainty
The British pound (GBP) remains above the 1.3300 level during Friday’s North American session, but is projected to record a weekly loss of 0.20% against the US dollar (USD). Risk aversion driven by Middle East tensions and oil price volatility has bolstered the USD as a safe-haven currency, contributing to broader monthly declines for the GBP exceeding 1%.
Key Drivers: Oil Volatility and Geopolitical Concerns
American consumers’ economic optimism waned in February, with the University of Michigan Consumer Sentiment Index dropping to 53.3 from 55.5, below forecasts. Inflation expectations for the next year rose to 3.8% from 3.4%, while five-year projections remained steady at 3.2%. Meanwhile, UK retail sales fell by 0.4% in February following a strong January gain of 2%. The Islamic Revolutionary Guard Corps (IRGC)’s closure of the Strait of Hormuz added to market unease.
Central Bank Expectations: Tightening Policies Expected
Money markets anticipate continued interest rate hikes from major central banks. The Federal Reserve is projected to raise rates by 5 basis points before year-end, while the Bank of England (BoE) is expected to increase rates by 78 basis points, according to Prime Market Terminal data. BoE Governor Alan Taylor emphasized that maintaining current rates until assessing Iran’s war impact on the economy remains a priority.
Technical Analysis: GBP/USD Faces Downtrend Pressure
The daily chart shows GBP/USD trading at 1.3311, with a mildly bearish bias. The pair remains below clustered simple moving averages near 1.35 and is constrained by the descending resistance line from 1.3869. A break below the support level of 1.3220 could signal further declines toward 1.3000. Immediate resistance lies at the 1.3400–1.3520 range, where moving averages converge.
Currency Performance: GBP Weakens Against Major Currencies
This week, GBP recorded a 0.26% gain against the Australian dollar (AUD) but declined by 1.44% versus the USD and 1.56% against the Canadian dollar (CAD). The pound’s performance against other currencies reflected broader market sentiment influenced by geopolitical risks and inflationary pressures.
