Market Analysis

GBP/USD Under Pressure Amid U.S. Inflation Data and Weak UK GDP

Dupoin · 12 Sep 202433K Views

GBPUSD

Prediction: Decrease

Fundamental Analysis:

The GBP/USD pair is facing downward pressure, currently trading around 1.3045, driven by recent U.S. inflation data. Reports from the European session have further weighed on the pound. While headline inflation showed a decline, the core CPI, which excludes volatile food and energy prices, remained steady at 3.2% annually for August, aligning with expectations. However, both CPI and core CPI saw monthly increases of 0.2% and 0.3%, respectively, exceeding forecasts. As a result, traders have reduced the likelihood of a 50-basis-point rate cut by the Federal Reserve, now anticipating an 85% chance of a 25-basis-point cut instead.

In the UK, weak GDP figures have added to the pound’s struggles. However, leading indicators suggest a potential improvement in UK economic activity, hinting that the Bank of England may limit its rate cuts to the expected 50 basis points by year-end, offering some support to the GBP.

Technical Analysis:

The GBP/USD pair’s decline to 1.3045 reflects growing bearish momentum. Key technical indicators like the Relative Strength Index (RSI) are near 50, while the Moving Average Convergence Divergence (MACD) remains in negative territory, pointing to further downside risk. If the RSI dips below 50, this could confirm increased selling pressure.

Despite the broader uptrend being intact, the pair's move below the 20-day moving average favors sellers in the short term. A break below 1.3035 would expose the first support at 1.3028, with additional declines potentially targeting the 50-day moving average (50-DMA) at 1.2995. A breach of that level could open the door to the March 8 high of 1.2894.

Conversely, if buyers manage to hold the price above 1.3150, the pair may see a recovery, with resistance levels at 1.3111, followed by 1.3150, and a psychological target of 1.3200.

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