GBP/USD registered six consecutive daily losses, falling over 2% last week before stabilizing above 1.2600. Strong US data weighed heavily on the GBP/USD pair.
Fed Chair Jerome Powell echoed his colleagues’ cautious stance on inflation, emphasizing that the Fed could remain patient with its policy approach. In his Thursday speech, Powell stated there was no need to rush rate cuts with the economy still growing and the job market solid, despite inflation remaining above the 2.0% target. This tempered expectations for a rate cut next month.
Core CPI rose to 3.3% in October, signaling that the Fed’s cutting cycle won’t be aggressive, which helped the USD outperform its rivals.
Meanwhile, UK GDP data expanded by 0.1% on a quarterly basis in the third quarter. This reading missed the market expectation of 0.2% growth, preventing GBP/USD from gaining traction ahead of the weekend.
The unexpected slowdown in UK GDP growth could raise expectations for further interest rate cuts by the Bank of England, potentially continuing the currency pair’s downtrend.
This week, speeches from BoE and Fed policymakers are expected to impact the currency pair, along with other economic data.
Wednesday’s UK CPI data will be crucial in shaping market expectations of future rate cuts by the BoE, as policymakers evaluate the Autumn Budget’s effect on the economy and inflation prospects.
Forecasts indicate a 2.2% increase in October. If the data meets or exceeds expectations, GBP/USD may reverse its trend and rally, suggesting the BoE will not be aggressive in cutting rates.
Central bankers’ speeches will dominate on Thursday, coinciding with the release of weekly US Jobless Claims data.
On Friday, S&P Global’s preliminary PMI data from the UK and the US will be released, which could spark volatility for GBP/USD.
Technical Analysis
Source: TradingView
GBP/USD has formed a downward trend after attempting a pullback on November 14, where it tested the pivot level at 1.27 but struggled to maintain momentum.
The 14-day Relative Strength Index is near the 30 level, suggesting the pair is in oversold territory, which typically aligns with increased bearish sentiment. However, this could also signal potential stabilization or a shift in momentum if buyers can regain control.
A move below the 1.26 level could indicate further bearish sentiment and may lead to increased downside pressure, with traders watching the pair’s next potential support around the 1.25 level.
On the other hand, if upward momentum develops, traders will be watching for a price move back toward the pivot line at 1.27, with potential resistance zones near 1.275 and 1.28.
