Thursday’s FX trade saw the British pound weaken modestly as political uncertainty and shifting interest-rate expectations returned to the foreground. Reuters flagged sterling slipping ahead of a key local election vote in Manchester, framed as an early political test in the UK, while markets also weighed Bank of England commentary suggesting a March rate cut was “a genuinely open question.”
Against this backdrop, the US dollar held steady rather than surging, a sign that USD support remains more structural (yields, growth perception) than momentum-driven right now. The result was a session where GBP/USD was the cleaner mover, while EUR/USD and USD/JPY traded more methodically.
GBP/USD
Technical Analysis
GBP/USD drifted lower in an orderly fashion, leaning into a controlled pullback rather than a sharp sell-off. From a chart perspective, it looked like a market gradually repricing risk: softer highs, cautious bids near support, and reduced willingness to chase breakouts.
What matters technically is not just the dip, it’s the failure to reclaim prior intraday highs, which signals that sellers are using rallies for distribution while uncertainty persists.
Fundamental Analysis
The pound’s softness was fundamentally driven by two overlapping risks:
- Political uncertainty tied to the Manchester vote and broader confidence in policy direction.
- BoE rate path uncertainty, with Governor Andrew Bailey explicitly emphasizing that a March cut is not decided. Reuters also noted the BoE’s recent close hold decision and the market’s sensitivity to inflation-versus-growth trade-offs.
This mix tends to produce cautious positioning, which often shows up as a slow GBP bleed rather than panic selling, exactly what Thursday delivered.
EUR/USD
Technical Analysis
EUR/USD traded steady-to-soft, holding range structure while showing slight downside pressure. The pair’s behavior looked like a market “respecting USD support”: dips held, but rallies struggled to gain traction. That’s typical when markets are not ready to call for USD weakness, but also not convinced enough to push a breakout.
Fundamental Analysis
With UK-specific headlines driving much of the day’s FX focus, EUR/USD didn’t receive a distinct catalyst. It moved more as a “dollar proxy,” staying contained while traders waited for broader signals.
USD/JPY
Technical Analysis
USD/JPY remained supported, holding above nearby demand zones. The pair continued to trade like a yield-led instrument: pullbacks were met with buying, but upside momentum was tempered, consistent with late-February consolidation.
Fundamental Analysis
No major shift altered the underlying yield differential story. The yen’s longer-term sensitivity remains tied to Japan’s policy outlook and global risk tone, while USD support continues to come from relative yield strength and the “Fed not rushing” narrative.
Market Outlook
Going into Friday, the market had two clear focal points: (1) monthly positioning and (2) sterling sensitivity to politics and the BoE rate path.
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