GBP/USD and FTSE 100 Forecast: Key Insights
By Fiona Cincotta, Senior Market Analyst
Date: February 26, 2026
GBP/USD Analysis
The GBP/USD currency pair has seen a decline, currently trading around 1.35, as attention shifts to the Gorton and Denton by-election in the UK. This election, prompted by the resignation of former Labour minister Andrew Gwynne, is critical for Prime Minister Keir Starmer. A loss for the Labour Party could raise questions about Starmer's leadership, especially since the party previously won this constituency comfortably.
Polls indicate a tight race between Labour and the Green Party, with Labour slightly ahead. A poor performance, particularly a third-place finish, could weaken Starmer's position, although it is unlikely to lead to his immediate ousting. Historically, no Prime Minister has resigned due to a by-election loss, and the current political climate does not favor a leadership challenge amidst ongoing parliamentary elections in Scotland, Wales, and local councils in England.
On the monetary policy front, expectations are growing for a rate cut from the Bank of England, influenced by recent softer employment data and a dovish tone from Governor Andrew Bailey. Meanwhile, the US dollar faces pressure due to tariff uncertainties and concerns regarding the Federal Reserve's independence, particularly following the implementation of a 10% tariff after a Supreme Court ruling.
Technical Analysis of GBP/USD
The GBP/USD pair encountered resistance at 1.3870, a high for 2026, before retreating to find support at the 200 SMA around 1.3440. The price has since tested the 50 SMA, with sellers aiming to break below both the 50 and 200 SMAs, potentially targeting 1.3350. Conversely, if the 50 SMA holds, buyers may push the price above 1.36, with 1.37 as the next target.
FTSE 100 Overview
Despite the pound's struggles, the FTSE 100 index is trading near record highs, benefiting from its international focus. The index rose over 1.1% recently, driven by an 8% increase in HSBC shares and strong performance from mining stocks. However, HSBC has since dropped 2%, and miners are down approximately 3% as metal prices decline.
The FTSE 100 has gained 8% year-to-date, outperforming the S&P 500, which has only increased by 1.2%. This performance is attributed to a shift from growth and tech stocks to value and cyclical stocks, alongside geographical diversification away from the US amid policy uncertainties.
Technical Analysis of FTSE 100
The FTSE 100 has been on an upward trend since April, reaching a record high of 10,830. The RSI indicates overbought conditions, suggesting a potential consolidation or pullback. Buyers are eyeing a target of 11,000, while support levels are identified at 10,650, with further support at 10,500 and 10,250.