**British Pound Forecast: GBP/USD Breaks 2025 Uptrend Ahead of BOE**
*Originally by Fiona Cincotta, Forex.com*
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**Overview**
As the foreign exchange markets continue to digest an evolving macroeconomic landscape, the British Pound (GBP) has come under heightened scrutiny. Amid shifting policy expectations and global market volatility, Sterling’s performance against the US Dollar (USD) has attracted particular attention. The GBP/USD currency pair has recently shed upward momentum, breaking its 2025 uptrend ahead of the Bank of England’s (BOE) next pivotal policy decision. This article carefully examines the factors driving the pair’s movement, analyzes key technical levels, and assesses what lies ahead for Sterling traders in the coming months.
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**GBP/USD’s Recent Performance and Break of Uptrend**
The first months of 2025 have been marked by significant volatility for GBP/USD. After ending 2024 on a broadly positive note, with Sterling benefiting from relative economic resilience and moderating inflation, the new year has brought fresh challenges. The pair recently fell below critical uptrend support, raising questions about Sterling’s near-term direction.
– The start of 2025 saw GBP/USD extending its fourth-quarter rally, but mixed economic signals and rising expectations for BOE rate cuts triggered a reversal.
– GBP/USD broke below its post-2024 uptrend, fracturing upwards support levels and establishing a more bearish tone.
– Technical signals confirm that the pair’s reversal is significant, raising the prospect for a deeper correction in the coming weeks.
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**Drivers of Sterling’s Weakness**
A confluence of domestic and external factors has contributed to Sterling’s recent underperformance. Key drivers include:
**1. BOE Policy Outlook**
– The Bank of England has cautiously shifted from a hawkish to a more neutral stance in early 2025.
– Cooling inflation, weak retail sales, and stagnating economic activity have increased expectations that the BOE could cut rates as soon as the first quarter or early Q2.
– Divergence between the BOE and the US Federal Reserve, which has remained relatively more hawkish, has widened yield differentials against Sterling.
**2. UK Economic Data**
– Recent releases have shown signs of weakness across sectors, including sluggish PMIs, disappointing industrial production figures, and flat real wage growth.
– Inflation remains above target, but the pace of price increases has slowed considerably, relieving some pressure from the central bank.
– The prospect of a “soft landing” is uncertain, with risks of a shallow technical recession or prolonged stagnation weighing on sentiment.
**3. US Dollar Strength**
– The US Dollar Index (DXY) has regained ground in 2025 amid sticky inflation, robust jobs reports, and less dovish signals from the Federal Reserve.
– As risk appetite falters on global growth concerns and geopolitical tensions, the US Dollar’s safe-haven appeal has come to the fore, compounding GBP/USD’s weakness.
**4. Market positioning and flows**
– Hedge funds and asset managers have pared back long GBP exposure amid waning conviction in further Sterling strength.
– Cross-asset flows, including outflows from UK equities and gilts, have also weighed on the Pound.
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**Technical Analysis: GBP/USD Chart Breakdown**
GBP/USD’s move below its key uptrend has sharpened focus on several important technical levels.
**Trend and Key Levels**
– The 2025 uptrend, anchored by a sequence of higher lows from late 2024, was decisively broken when GBP/USD closed under 1.2650.
– Immediate horizontal support was tested near 1.2600, with a further break opening the door to 1.2500 and potentially 1.2370, the December 2024 lows.
– On the upside, former trendline support and the 50-day moving average near 1.2680 now act as initial resistance.
**Momentum Indicators**
– Daily Relative Strength Index (RSI)
Read more on GBP/USD trading.