GBP/USD traded near 1.3350, falling for a third day as the US-Iran conflict escalated. The International Energy Agency agreed to release around 400 million barrels of oil from members’ strategic reserves to cool energy prices. Higher oil prices have added to inflation pressure, complicating expectations for a near-term Bank of England rate cut. A Reuters poll showed the BoE is expected to hold rates at 3.75% on 19 March, with 43 of 50 economists, or 86%, forecasting no change (up from 35% in the February poll).

Us Data And Risk Sentiment

US data came in stronger than expected, with the goods and services trade deficit narrowing to $54.5 billion in January from $72.9 billion in December. Initial jobless claims fell to 213K in the week ended 7 March, from a revised 214K, versus 215K expected. On the 1-hour chart, GBP/USD was around 1.3345, below the 20-period SMA at 1.3381 and the 100-period SMA at 1.3396, with RSI at 34. On the 4-hour chart, the 100-period SMA was near 1.3438 and the 20-period SMA near 1.3412, with RSI in the low 40s. Resistance levels were listed at 1.3370 and 1.3409, with support at 1.3339. A break below 1.3339 was linked to a move towards the mid-1.32s, while a move above 1.3409 would weaken the downside bias. We are seeing echoes of the situation from this time last year, when escalating Middle East tensions drove fears of an oil-driven inflation spike. Back in March 2025, those events pushed GBP/USD down towards 1.3350 as the market priced out a Bank of England (BoE) rate cut. Today, the pair is trading significantly lower near 1.2450, facing a similar but distinct set of pressures.

BoE Policy And Oil Market Backdrop

The BoE is once again in a difficult position, holding its Bank Rate at 4.25% ahead of its meeting next week. While UK inflation has fallen from its 2025 peaks, the latest CPI reading for January 2026 came in at a sticky 3.1%, still well above the bank’s 2% target. This persistent inflation complicates any discussion of rate cuts, much like the oil price shock did last year. Unlike the supply-side shock we saw in 2025, current oil prices are more influenced by global demand concerns. Brent crude is currently hovering around $82 per barrel, down from last year’s highs, but renewed OPEC+ production discipline is keeping prices firm. This provides a floor for energy prices, preventing a sharp drop in inflation that would give the BoE a clear green light to ease policy. On the other side of the currency pair, the US economy continues to show resilience, strengthening the dollar. The most recent Non-Farm Payrolls report for February 2026 showed the economy added 275,000 jobs, handily beating expectations and reinforcing the case for the Federal Reserve to remain patient. This dynamic, a hesitant BoE versus a patient Fed, is weighing heavily on the pound. Given this backdrop, we should consider that any strength in GBP/USD is an opportunity to position for further downside. Recent CFTC data shows that speculative net short positions against the pound have increased, suggesting market sentiment is decidedly bearish. Derivative traders could look to buy put options with a strike price below 1.2400 or use rallies toward the 1.2500 resistance level to initiate short futures positions. Create your live VT Markets account and start trading now.

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