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18.05.202604:19 Forex Analysis & Reviews: GBP/USD: Weekly Preview. All Eyes on British Inflation

Relevance up to 20:00 2026-05-18 UTC--4

Exchange Rates 18.05.2026 analysis

The GBP/USD currency pair plummeted nearly 300 pips last week. Initially, the downward movement appeared to be just another correction before the trend resumed, but by the end of the week, it became clear that something was off. The market once again reacted to the verbal escalation of the conflict in the Middle East. Iran and the US failed to reach an agreement once more, and experts note that progress in negotiations is lacking. The negative impact on the British currency was further exacerbated by the political crisis in the UK and by the US inflation rate rising to 3.8% in April. Thus, while we cannot say that the pound sterling's decline was unwarranted, it also seems unreasonable to consider it deserving of a complete collapse.

In the new week, Donald Trump and geopolitics will once again take center stage. Last week, information emerged that the US and Israel might resume strikes against Iran as early as Monday. We would not take this information too seriously, but at the same time, the probability of renewed warfare exists and is not insignificant. It is important to note that predicting Trump's actions is impossible. Moreover, very few officials are informed about the state of negotiations with Tehran. If no information is reported in the media, it does not necessarily mean that negotiations are absent or that escalation is occurring. It is worth noting that neither Washington nor Tehran has officially exited the negotiation process. Therefore, it is far from certain that warfare in the Middle East will resume this week.

Among the truly significant macroeconomic events, we can highlight the UK inflation report. This report is noteworthy because it may indicate that the consumer price index did not accelerate in April but instead slowed down. Recall that in March, when inflation was rising rapidly in the US and the EU, it rose by only 0.3% in the UK. For April, it may even drop back to 3%. If the actual index value turns out to be this low, the pound sterling may decline even further, as in this case, the Bank of England will have no need to tighten monetary policy.

We even believe that last week, the geopolitical effect was intensified by the upcoming inflation report. Recall that hawkish expectations regarding the Federal Reserve are growing, and many expected the Bank of England to raise rates in the summer. However, with inflation at 3%, there would be no necessity for that. Therefore, the European Central Bank may become the only central bank among the big three that raises rates this summer. This is likely why the euro lost half as many points last week as the British pound did.

Overall, we believe that the negative factors for the GBP/USD pair have already been fully priced in by the market last week. They were indeed present, but they are not severe enough to justify a further 300-pip decline in the pound. For some time, the pair may continue to move down on inertia and will largely depend on geopolitical events.

Exchange Rates 18.05.2026 analysis

The average volatility of the GBP/USD pair over the last 5 trading days is 101 pips. For the pound/dollar pair, this value is considered "average." On Monday, May 18, we expect the pair to trade within a range between 1.3223 and 1.3425. The upper linear regression channel has turned upward, indicating a potential recovery in the upward trend. The CCI indicator has not generated signals recently.

Nearest support levels:

S1 – 1.3306

S2 – 1.3245

S3 – 1.3184

Nearest resistance levels:

R1 – 1.3367

R2 – 1.3428

R3 – 1.3489

Trading Recommendations:

The GBP/USD pair has sharply declined, so the upward trend is currently not relevant. Donald Trump's policies will continue to exert pressure on the US economy, and we do not expect long-term growth from the US dollar. However, 2026 seems poised to be a very positive year for the dollar. Thus, long positions with targets of 1.3550 and 1.3611 can be considered if the price is above the moving average. If the price is below the moving average line, short positions can be traded with targets of 1.3245 and 1.3223 based on technical grounds. The market situation has flipped upside down in just one week.

Explanations for the Illustrations:

  • Linear Regression Channels: Help define the current trend. If both are directed in the same direction, it indicates a strong trend.
  • Moving Average Line (settings 20,0, smoothed): Determines the short-term trend and direction in which trading should be conducted.
  • Murray Levels: Target levels for movements and corrections.
  • Volatility Levels (red lines): Likely price channel where the pair will trade in the coming days based on current volatility metrics.
  • CCI Indicator: Its entrance into the oversold zone (below -250) or the overbought zone (above +250) indicates that a trend reversal is approaching in the opposite direction.

*تعینات کیا مراد ہے مارکیٹ کے تجزیات یہاں ارسال کیے جاتے ہیں جس کا مقصد آپ کی بیداری بڑھانا ہے، لیکن تجارت کرنے کے لئے ہدایات دینا نہیں.

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