- GBP/USD tallied another day of losses falling below 1.3050.
- US CPI came in mixed and markets reduced the odds of a 50 bps cut.
- Earlier in the session the UK reported weak GDP figures.
The GBP/USD pair remains under pressure, trading near 1.3045 as the market reacted to the latest US inflation data. Economic activity released during the European session seems to have added pressure on the pound.
While the headline inflation declined, annual core CPI, which excludes volatile food and energy prices, remained unchanged at 3.2% in August, in line with market expectations. However, on a monthly basis, both CPI and core CPI rose by 0.2% and 0.3%, respectively, exceeding market forecasts. The data has led traders to reduce the odds of a 50-basis-point rate cut by the Federal Reserve and the market is now pricing in an 85% chance of a 25-basis-point cut.
What weakened the GBP was the report of soft Gross Domestic Product (GDP) releases during the European sessions. Despite this, leading indicators point to a potential rebound in UK economic activity, suggesting that the Bank of England is unlikely to cut rates by more than the currently anticipated 50 basis points by year-end, which could provide some support for the GBP.
GBP/USD Technical Outlook
The GBP/USD pair's decline to 1.3045 reflects deepening bearish pressure, with key technical indicators like the Relative Strength Index (RSI) pointing down near 50 and the Moving Average Convergence Divergence (MACD) firmly positioned in negative territory. This suggests that bearish sentiment could persist in the short term especially if the RSI breaks the 50 barrier.
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