The UK economy expanded by 0.6% in the first quarter of 2026, a significant increase from the revised 0.2% growth seen in the final quarter of 2025. This growth was primarily driven by an 0.8% expansion in the services sector. Despite robust macroeconomic figures, the British pound did not find support as CPI inflation surged to 3.3% year-on-year in March, up from 3.0% in February. This acceleration was largely attributed to rising motor fuel prices, a consequence of the Middle East conflict. On April 30, the Bank of England’s Monetary Policy Committee voted 8–1 to maintain the base rate at 3.75%, although several members indicated a willingness to tighten policy further if inflationary pressures persist. The International Monetary Fund projects UK GDP growth for 2026 to be only 0.8%, marking the largest downgrade among G7 economies.
Between April 6 and May 1, the GBP/USD pair established an upward trend, bolstered by a rising trendline. As the pair neared its peak, price action tightened considerably, forming a reversal pattern characterized by a concentrated profile between 1.3480 and 1.3580, indicative of increasing selling pressure. Following a breach of the trendline and an exit from this profile range, the pair experienced a rapid decline. Currently, GBP/USD is trading below the horizontal volume zone, suggesting sustained seller control. For buyers, the immediate reference zone is the lower profile boundary, followed by the Point of Control (POC) area at 1.3515–1.3520. Should the pair reclaim the upper profile boundary at 1.3580, the subsequent resistance level would be 1.3650, close to recent trend highs. Crucial structural support exists around 1.3380, aligning with the price extremes before the April rally. The pair is nearing this important level, which could restrict further downside movement in the short term. The RSI + MAs indicator registers readings of 26, 38, and 43, with moving averages still trending downwards, signifying persistent bearish pressure. However, the Relative Strength Index (RSI) has already entered oversold territory, a factor to consider.
Despite robust first-quarter GDP figures, anxieties regarding inflation and monetary policy uncertainty persist. This underlying fundamental conflict is poised to significantly influence the pair’s future trajectory. Technically, while the primary RSI + MAs reading indicates oversold conditions, there are not yet clear signs of an impending reversal.
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