GBP/USD continued to decline for another day, dropping below 1.3050 as US CPI data came in mixed, causing traders to reduce the odds of a 50 basis point rate cut. The UK also reported weak GDP figures, adding pressure on the pound. Despite this, leading indicators suggest a potential rebound in UK economic activity, making it unlikely for the Bank of England to cut rates by more than the anticipated 50 basis points by year-end.
The US inflation data showed that while headline inflation declined, annual core CPI remained unchanged at 3.2% in August. Monthly CPI and core CPI both exceeded market forecasts, leading to a reduction in the chances of a 50-basis-point rate cut by the Federal Reserve. The market is now pricing in an 85% chance of a 25-basis-point cut. This news contributed to the weakening of the GBP against the USD.
In terms of technical outlook, the GBP/USD pair’s decline to 1.3045 indicates deepening bearish pressure. Key technical indicators like the RSI and MACD suggest that bearish sentiment could persist in the short term, especially if the RSI breaks the 50 barrier. This could mean further downward pressure on the GBP/USD pair in the coming days.
Despite the current bearish sentiment, the potential for a rebound in UK economic activity could provide some support for the GBP. Leading indicators point towards a possible recovery, which may prevent the Bank of England from cutting rates beyond the currently anticipated 50 basis points by the end of the year. This could help stabilize the GBP and prevent further significant losses against the USD in the near future.
Overall, the GBP/USD pair remains under pressure as a result of mixed US inflation data and weak UK GDP figures. The market’s reaction to these economic indicators, as well as technical signals pointing towards bearish sentiment, suggest that further declines may be on the horizon. However, the potential for a rebound in UK economic activity could offer some support for the pound in the face of ongoing uncertainty and volatility in the global markets.
