The GBP/USD pair saw a notable drop, hitting 1.3048 on Thursday, driven by a combination of disappointing domestic inflation data and a stronger US dollar overall. The recent decline in the pound is linked to the latest UK Consumer Price Index report, which shows that inflation has eased to 3.6% year-on-year in October, meeting expectations. This bolstered market expectations that the Bank of England could start cutting interest rates as early as December. The data reflects a broader pattern of weakening domestic demand: the labor market is showing signs of softness, GDP growth is not meeting the central bank’s projections, and core inflation is slightly dipping below the Bank of England’s anticipated path. In light of this context, institutions like Deutsche Bank suggest that the Monetary Policy Committee is poised to gain the confidence needed to lower the Bank Rate from its current level of 4.00%.
Further difficulties for sterling emerged due to a rising US dollar, which gained momentum ahead of important US macroeconomic data and the highly anticipated earnings report from the AI-chip frontrunner, Nvidia. Investor attention worldwide is focused on the Japanese yen, which has dropped to a 10-month low after a statement from the Ministry of Finance expressing a “high degree of caution” about the currency’s fluctuations. This statement avoided suggesting any prompt action. The market is currently experiencing a significant increase in uncertainty. US statistical agencies are beginning to release the backlog of data that was delayed due to the recent government shutdown, prompting traders to piece together a clearer understanding of the actual state of the world’s largest economy.
On the H4 chart, GBP/USD has completed a decline to 1.3037. We now anticipate a technical adjustment aiming for at least 1.3080. Following this pullback, the primary downtrend is expected to persist, driving the pair down to 1.2990, with a longer-term perspective indicating additional declines to 1.2915. This pessimistic outlook is confirmed by the MACD indicator. The signal line sits below zero and is sharply declining, indicating that selling momentum remains robust. On the H1 chart, the pair has shown a downward breakout from a consolidation range near 1.3090, confirming the continuation of the bearish trend. The next objective for this movement is 1.3030. A rebound to revisit the 1.3090 level from beneath seems likely before the next phase of selling pushes the pair down to 1.2990 and potentially towards 1.2950. The Stochastic oscillator aligns with this viewpoint. The signal line is above 50, indicating that a brief corrective bounce is occurring before the dominant downtrend resumes.
The GBP/USD is facing a difficult mix of internal dovish trends and external dollar strength. The recent softer inflation data has significantly increased the chances of a rate cut by the BoE in December, reducing the appeal of sterling’s yield. The present path shows a distinct tendency for a decline. While a slight dip to 1.3080 seems likely, this could present a potential selling opportunity within the broader downward trend, which has established targets at 1.2990 and 1.2915.