The GBP/USD pair is currently trading in a tight range near 1.3325, showing signs of stabilization following five consecutive sessions of declines. Despite the softer U.S. CPI data indicating inflation at 2.8%, sterling has struggled to gain momentum, as the UK’s lackluster Q3 GDP growth of merely 0.1% continues to impact sentiment negatively. The currency pair is currently fluctuating within a brief consolidation range, finding support just above the 1.3300 mark while facing resistance at the 100-hour moving average around 1.3354. The pound’s struggle to regain that resistance highlights ongoing weakness due to inflation issues, subdued domestic demand, and uncertainty surrounding the Bank of England’s policies. The U.S. dollar continues to demonstrate strength, driven by changing market anticipations regarding Federal Reserve rate cuts, in light of a series of weaker inflation reports. The CPI decline to 2.8% signifies the third consecutive monthly slowdown, raising speculation regarding an earlier pivot by the Fed than previously anticipated. However, although this has temporarily alleviated pressure on the dollar, the overall macroeconomic landscape continues to support the greenback, driven by strong employment and consumer spending figures in the U.S.
The British pound remains under pressure due to ongoing inflation, compelling the Bank of England to adopt a delicate position. As consumer prices continue to surpass expectations and energy expenses stay elevated, decision-makers find themselves navigating the delicate balance between managing inflation and averting a recession. The gap between U.S. and UK monetary policy has expanded rate differentials, bolstering the dollar and hindering GBP/USD from achieving a lasting recovery. From a technical perspective, GBP/USD is currently moving within a narrowed channel, characterized by support at 1.3247 and resistance at 1.3350, indicating a distinct downside bias. A decisive break below 1.3247 would pave the way to the 1.3140 cluster, which encompasses the 38.2% retracement of the 1.2099–1.3787 range, representing a significant technical confluence. Traders are closely monitoring the 200-day moving average around 1.3225, viewing it as a significant pivot point.
On the upside, reclaiming 1.3354 (the 100-hour moving average) would be the first signal of recovery; however, momentum indicators remain weak, and RSI continues to hover around neutral territory. The inability of bulls to maintain upward momentum past 1.3340 following the CPI release indicates that sellers continue to dominate the market. If sterling successfully breaches 1.3526, it may initiate a rapid movement towards 1.3725–1.3787; however, this outcome hinges on a significant change in the perception of UK growth potential. The most recent UK CPI report indicates that inflation remains elevated, impacting real wages and putting pressure on household finances. The ongoing inflationary pressures exceeding the 2% target have constrained the Bank of England, restricting its options for action. The UK economy is currently experiencing GDP growth at a mere 0.1%, which raises concerns about the potential onset of stagflation — characterized by sluggish growth coupled with high inflation rates.
The weakness of the British pound is attributed to investor skepticism regarding the Bank of England’s strategy. Market participants observe a degree of uncertainty from the central bank, as inflation expectations continue to lack stability. Government bond yields indicate this concern, with gilts varying following the CPI release as traders adjusted their rate predictions. A persistent absence of policy clarity is expected to limit sterling’s potential for appreciation and maintain GBP/USD close to its current range. Across the Atlantic, U.S. data has demonstrated unexpected strength. The Dow Jones Industrial Average achieved record highs after the cooler CPI print, highlighting investor optimism regarding the potential for a sustainable decline in inflation. Nonetheless, this optimism has not entirely manifested in a decline in the dollar, as Federal Reserve officials have indicated a careful approach regarding rapid rate cuts. The current pricing in the market suggests that there will be at least one rate cut before mid-2026; however, policymakers are keeping their options open based on labor and wage trends. This prudent approach has ensured that Treasury yields remain relatively stable, allowing the dollar to sustain its advantage against currencies such as sterling. The GBP/USD pair continues to illustrate the contrast in monetary policies — a robust narrative from the U.S. juxtaposed with a challenging situation in the UK.