Published: 27 March 2026,07:15
Daily Market Analysis New
Key Takeaways:
*Pound strengthens on hawkish Bank of England tone
*Policymakers warn of rising inflation risks linked to energy markets
*Markets remain cautious amid uncertainty over Middle East developments
The British pound extended its gains, supported by a relatively hawkish tone from the Bank of England, even as concerns over the UK’s economic outlook persist.
Sterling has been underpinned by growing expectations that policymakers may need to maintain a tighter monetary stance, particularly as rising energy prices — driven by ongoing tensions in the Middle East — pose upside risks to inflation.
Bank of England Chief Economist Huw Pill highlighted these concerns, stating that “upside risks to price stability” are increasing due to developments in the Gulf region. He added that persistent uncertainty “cannot be an excuse for inaction,” signaling a bias toward vigilance on inflation.
However, broader policymaker sentiment appears more cautious. Analysts note that the BoE is likely to adopt a data-dependent approach, awaiting clearer evidence on how higher energy costs feed through to broader inflation.
Nick Rees, Head of Macro Research at Monex Europe, said that more data is needed to assess both the magnitude and transmission of energy-driven inflation pressures. In the absence of clearer signals, he expects rate-setters to remain in a “wait-and-see” mode, with upcoming PMI releases likely to be a key focus ahead of the next policy decision.
Recent UK inflation data offered mixed signals. Headline inflation held steady at 3.0% in February, in line with expectations. However, core inflation — which excludes volatile items — edged higher to 3.2% from 3.1%, indicating persistent underlying price pressures.
Within the breakdown, goods inflation remained unchanged at 1.6%, while services inflation — closely watched by policymakers — eased slightly to 4.3% from 4.4%, though still elevated.
Overall, sterling’s near-term direction is likely to remain influenced by a combination of monetary policy expectations and external developments, particularly the evolution of geopolitical risks and their impact on energy prices and inflation.
Technical Analysis
GBP/USD is trading higher after rebounding from an ascending trendline, suggesting continued short-term bullish momentum.
The MACD is strengthening, while the RSI at 49 is recovering from oversold territory, indicating improving momentum despite still being near neutral levels.
If bullish momentum continues, the pair could advance toward 1.3375 resistance, followed by 1.3470.
However, if momentum weakens, GBP/USD may retrace toward the trendline support, with further downside toward 1.3315.
Resistance Levels: 1.3375, 1.3470
Support Levels: 1.3315, 1.3220
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