23rd March 2026
Underlying trend:
Upward trend following the hawkish BoE pivot on Thursday 19 March, with sterling posting the strongest performance against the dollar among 14 major currencies—rising 1.14% and gaining 1.31% to reach its highest level since 9 March—despite ongoing resistance from resilient dollar strength
Trend bias:
Upward trend following hawkish BoE pivot on Thursday 19 March, though facing resistance from resilient dollar strength
The pound registered the best performance against the dollar among 14 major currencies on Thursday, strengthening 1.14%
Sterling gained 1.31% on Thursday to reach its highest level since 9 March
Factors in price action:
BoE held rates and signalled it "stands ready to act" against inflation surge triggered by Middle East conflict, fueling bets on a rate hike as soon as April
Money markets now price 63 basis points of BoE hikes by year-end following Thursday's decision
Traders remain bearish on the pound despite hawkish BoE messaging, with one-month risk reversals hovering around the most bearish level since January 2025
UK economy unexpectedly stalled in January, weighing on sentiment earlier in the week
Broader dollar strength driven by elevated oil prices and geopolitical tensions limiting GBP upside
This week (Mon–Fri preview):
Monday: Light US data with Chicago Fed National Activity Index and Construction Spending; EUR Consumer Confidence expected to weaken to -14.6
Tuesday: Major PMI releases - UK Services PMI forecast to soften to 53.0 from 53.9, Manufacturing to 51.0 from 51.7; Eurozone and US PMIs also due
Wednesday: Critical UK inflation data - CPI expected to hold at 3.0% YoY with Core at 3.1%; German IFO indicators anticipated to weaken; US Current Account Balance
Thursday: Eurozone confidence indicators and M3 Money Supply; US weekly jobless claims expected at 205k
Friday: UK Retail Sales forecast to cool (MoM from 1.8% to 0.2%, YoY from 4.5% to 2.6%); UK Consumer Confidence expected to deteriorate sharply from -19 to -25
Key risks ahead:
GBPUSD Downside risks: Weaker UK inflation data could reduce BoE hawkish stance; sharp deterioration in consumer confidence and retail sales may signal economic softening; PMI contraction in services would be concerning; options positioning remains bearish despite hawkish BoE
GBPUSD Upside risks: Sticky UK inflation maintaining BoE rate hike expectations; stronger UK PMIs relative to peers; further hawkish BoE commentary
Most likely direction: Mixed to mildly lower - while hawkish BoE repricing provides support, the boost from higher rates is set to falter as negative economic consequences are digested; broader dollar strength and geopolitical tensions may cap gains
