GBP/USD Forecast: Is the Pound Ignoring Inflation Data?

During today’s session, a consistent neutral bias has continued to shape GBP/USD price action in the short term, with the pair showing barely a 0.1% variation. This highlights a clear sense of market balance. This behavior comes despite the release of inflation data for the UK, which still seems insufficient to generate meaningful movements around the pound in the short term.

This suggests that market focus remains centered on what may happen with ongoing negotiations in the Middle East, which could eventually reshape expectations around the US dollar and, therefore, GBP/USD. For this reason, even after the release of recent inflation data, price action may continue to reflect a neutral tone in the coming sessions, at least until more relevant updates regarding the conflict emerge.

New inflation data released

During today’s session, UK CPI year-over-year data was released, coming in at 3.3%, in line with expectations. While the data once again shows a steady short-term increase—moving away from levels close to 3.0% seen in February—this rise had largely already been priced in by the market, meaning there were no major surprises capable of shifting the outlook for the pound at this stage.

Source: TradingEconomics

That said, and considering the latest release, the data came in as expected and, although inflation remains above the Bank of England’s 2.0% target, it does not significantly alter the central bank’s current stance. This keeps expectations unchanged that there will be no major adjustments in interest rates in upcoming policy decisions. However, since this scenario was already widely anticipated, it helps explain why short-term movements in the pound have remained limited.

Taking all of this into account, it is possible that the inflation release on its own was not enough to trigger a consistent market reaction, which in turn reinforces the sense of indecision in GBP/USD. Still, any relevant comments from the Bank of England, especially as the May 8 policy decision approaches, could bring volatility back in the coming weeks.

 

The dollar begins to recover

While the situation in the Middle East has not seen significant escalation in the short term, ongoing negotiations still fail to provide a clear outlook. This is reflected in specific developments: the United States maintains a ceasefire but also continues with a naval blockade, while Iran keeps demanding concrete guarantees before moving forward with more stable negotiations. This creates a scenario where there is no open conflict, but also no real de-escalation in the short term.

This environment has introduced a degree of market caution, allowing for some stabilization in demand for the US dollar. This can be seen in the behavior of the DXY index, which measures the strength of the dollar, and has shown a consistent recovery in recent sessions, holding slightly above the 98.5 level with a short-term upward slope.

Source: CMEGROUP

With this in mind, the lack of meaningful updates around the conflict may be creating room for the dollar to maintain a mild strength bias, which in turn limits the pound’s ability to gain ground consistently. This reinforces the likelihood of continued neutral price action in GBP/USD in the coming sessions.

 

Technical outlook for GBP/USD

Source: StoneX, Tradingview

• Bullish momentum begins to fade: Although GBP/USD had been showing a relevant upward move on the daily chart over several sessions, recent price action has started to reflect a loss of bullish momentum. The pair is now showing a more neutral structure, which could open the door to a short-term sideways range rather than clear trend formation.
   

• RSI: The RSI line is gradually approaching the neutral 50 level, suggesting that bullish momentum over the past 14 sessions has started to weaken. This supports the idea of a more balanced market environment, where indecision could remain a dominant factor in GBP/USD price action in the short term.
   

• MACD: Similarly, the MACD indicator shows a histogram close to the zero level, reflecting a balance between short-term moving averages. This behavior continues to support the presence of a consistent neutral phase in the market.
   

Key levels:

• 1.35610 – Key resistance: This level corresponds to the most relevant recent highs. Price action above this area could reaffirm bullish momentum and open the door for the development of a short-term uptrend.
   

• 1.34182 – Near-term barrier: A neutral zone aligned with the 50 and 200-period moving averages. Price hovering around this level could reinforce a phase of indecision and the potential formation of a short-term range.
   

• 1.33059 – Key support: This level represents the most relevant recent lows. A move toward this area could bring back selling pressure and restore the relevance of a previous bearish trend.
   

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25