02.03.202619:18 Forex Analysis & Reviews: GBP/USD. Smart Money. The Economic Outlook for Europe and the UK Has Deteriorated Significantly

The GBP/USD pair continues to decline within a bullish trend. The only working pattern that may currently be useful for traders is the bearish imbalance 16. This pattern could have been tested last week, but the bulls fell short by just 6–7 points of reaching it. As a result, no bearish signal was formed, and traders had no reason to open short positions. It should also be remembered that the bullish trend remains intact. The pair may fall even to the 1.3100 level, and the bullish trend would still remain valid. Even with the outbreak of war in the Middle East, I doubt the advisability of selling.

Today, nearly all analysts have written about the sharp rise in oil and gas prices, the blockade of the Strait of Hormuz, and strikes on oil and gas facilities, all of which significantly worsen the global economic outlook. Energy-vulnerable European countries are affected first and foremost. In my view, not only the dollar's status as a safe-haven asset is driving the current decline in EUR/USD and GBP/USD, but also the deteriorating economic prospects of Europe and the United Kingdom. Rising oil and gas prices (gas in Europe has already increased by 50% in a single day) will not only lead to another surge in inflation but will also significantly reduce industrial output and slow an economy that is already growing at a modest pace. Thus, a single military conflict in the Middle East has simultaneously supported the dollar and weighed on European currencies.

The bullish trend in the pound remains intact. Therefore, as long as it holds (above 1.3012), I would focus more on bullish signals. The decline in the pound may be substantial, but it could also end at any moment. The only currently active imbalance 16 has not produced any signal. There are no grounds for new trades at this time. I would also note the potential liquidity grab from the January 19 swing. It will only be possible to confidently speak of a bearish liquidity grab after the daily candle closes, but current developments point in that direction. Thus, if not a bullish signal, then at least a bullish warning may form today.

Monday's news background was noteworthy even at first glance, but economic data attracted little attention. Traders shifted their focus entirely to geopolitics and the consequences of the conflict between Iran and the United States that began on Saturday. As a result, even the U.S. ISM Manufacturing Index was largely ignored by the market.

In the United States, the overall information backdrop remains such that, in the long term, expectations point more toward dollar weakness than strength. The war between Iran and the United States changes little for now. The situation for the U.S. dollar remains difficult in the long term and relatively positive in the short term. However, that positivity is limited to the short term. U.S. labor market data continues to disappoint more often than it impresses. Three of the last four FOMC meetings ended with dovish decisions. Trump's military actions, threats toward Denmark, Mexico, Cuba, Colombia, EU countries, Canada, and South Korea, the criminal case initiated against Jerome Powell, government shutdowns, the scandal involving the U.S. elite related to the Epstein case, the possibility of Trump's impeachment by year-end, and the likely electoral defeat of Republicans all contribute to the broader picture of political and structural crisis in the United States. In my view, bulls have sufficient grounds to continue their advance throughout 2026.

A bearish trend would require strong and stable positive news for the dollar, which is difficult to expect under Donald Trump. Moreover, the U.S. president himself does not need a strong dollar, as it would keep the trade balance in deficit. Therefore, I still do not believe in a bearish trend for the pound. Too many risk factors continue to weigh heavily on the dollar. Bearish patterns may justify short positions, but personally I would not recommend that approach. I consider the recent decline of the pair to be, to some extent, the result of a combination of circumstances.

News Calendar for the U.S. and the UK:

On March 3, the economic calendar contains no noteworthy entries. The influence of economic news on market sentiment on Tuesday is expected to be minimal, though news from the Middle East may continue to emerge.

GBP/USD Forecast and Trading Advice:

For the pound, the broader picture remains bullish, although the short-term outlook has turned bearish. There are currently no active bullish patterns. Only bearish imbalance 16 remains, and the price must first return to it and produce a reaction before traders can consider potential short positions.

It is worth noting that the pound's decline in recent weeks has been strong enough to transform the bullish structure into a bearish one due to unfavorable circumstances. If Donald Trump had not repeatedly threatened to attack Iran and sent warships to the Persian Gulf, we likely would not have seen such a sharp drop in the pound. I believe this decline may end as unexpectedly as it began. In my view, the trend in recent weeks has not turned bearish.