GBP/USD, FTSE 100 Forecast: Two trades to watch

GBP/USD falls amid political risk & on BoE rate cut expectations

GBP/USD trades on a weaker note around the 1.3685 level in the European session on Tuesday.

The pound is under some pressure amid political risks in the UK and rising expectations of a near-term rate cut from the BoE.

Prime Minister Kier Starmer was under serious pressure at the start of the week, facing a leadership challenge after several high-profile resignations and after Scottish Labour leader Anas Sarwar called for his resignation amid the fallout from the Jeffrey Epstein scandal.

Today, Starmer’s position has stabilised slightly, having survived the political near-death experience at least for now. Strong support from the cabinet and various wings of the Labour Party means the Prime Minister will live to see another day in office.

UK gilt yields rose yesterday after calls for Keir Starmer to step down and amid fears of a more left-wing Labour leader, such as Angela Rayner. However, yields on the 10-year gilt are down modestly again today, supporting the view that Starmer’s position is stabilising.

The pound remains under pressure as investors weigh the political drama together with expectations that the Bank of England is close to cutting interest rates again. Inflation is expected to ease below 2% target as early as April, and with signs of weakness in the UK labour market, the Bank of England may cut rates potentially as soon as March.

The USD is holding steady on Tuesday after steep losses yesterday against its major peers, with attention turning to retail sales data, which could offer some support. Expectations are for retail sales to rise 0.4% month-on-month, a sign of solid consumption.

However, the main focus will be on Wednesday's nonfarm payroll report and Friday's inflation figures for more clues on the timing of the next Fed rate cut.

GBP/USD forecast – technical analysis

GGBP/USD extended its recovery from the 1.30 November low, running into resistance at 1.3870 in late January and rebounding lower. The bearish momentum has faded, but GBP/USD’s recovery has stalled around the 1.37 level.

Buyers will need to rise above the 1.37 resistance zone to bring 1.38 back into focus ahead of 1.3870. A rise above here creates a higher high.

Support is seen around the 1.36 zone; a break below here would create a lower low and expose the 200 SMA at 1.3425.

FTSE 100 falls with BP, Barclays earnings under the spotlight

The FTSE is falling on Tuesday after two sessions of gains, pulled lower by heavyweight energy, banking, and mining stocks.

The FTSE is failing to find support from the slightly more stable political picture and is instead looking to earnings.

BP has fallen by over 5% after suspending its share buyback, while Standard Chartered is also down 4.5% following the surprise departure at CFA.

BP reported profits of $7.5 billion in 2025, down from $8.9 billion the previous year, after crude oil prices fell 20%. The oil major said it was suspending its share buyback programme and increasing its target for cost savings.

Separately, miners are under pressure as precious metal prices have fallen.

On the upside, Barclays is outperforming after reporting a 12% annual increase in profit, driven by a strong performance from its investment banking division. The British bank also plans to return £15 billion to shareholders.

Barclays announced a pretax profit of £1.9 billion on Tuesday, ahead of expectations of £1.7 billion for the quarter. Revenues were up 2% from the same period last year to £7.1 billion. Strong revenue flows were driven by solid performance in fixed-income and equities trading.

Barclays trade 2% higher today.

FTSE forecast- technical analysis

The FTSE has extended its bullish trend, forming a series of higher highs and higher lows. The price reached a record high of 10,480 before easing modestly lower to 10,340 at the time of writing.

Buyers will look to extend gains above 10,480 to fresh record highs towards 10,500 and 11,000 as the next logical levels.

Support is seen at 10,220, the 20 SMA, and the rising trendline. Below here 10,000, the round number comes into focus and 9910 the November high.