The GBP/USD pair is facing significant downward pressure, driven by contrasting monetary policy outlooks from the Bank of England (BoE) and the Federal Reserve (Fed). Recent UK economic data has fueled a bearish sentiment, leading the pair to approach levels not seen since October 2023, and marking a near 10% drop from its 2024 peak.
Key Drivers:
- Weak UK Economic Data: The UK economy showed slower-than-expected growth in November (0.1% vs. 0.2% est.), with industrial and manufacturing output also declining. The trade deficit continues to widen, further weakening the pound.
- Lower UK Inflation: UK inflation figures came in below expectations, with headline CPI dropping to 2.5% and core inflation falling to 3.2%. These figures suggest the BoE may adopt a more dovish stance, likely leading to rate cuts.
- Hawkish Fed Stance: In contrast, the US Federal Reserve is expected to maintain a hawkish tone, especially with Donald Trump’s presidency, potentially leading to fewer interest rate cuts than previously anticipated. US inflation remains elevated, and the labor market is strong.
- Technical Bearish Signals: The GBP/USD daily chart indicates a strong downtrend. The pair has broken below key levels and retested them, a classic sign of bearish continuation. It’s also trading below the 50-day moving average, with the MACD below the zero line since October and RSI nearing oversold territory.
Trading Signals:
Bearish Signal (Primary):
- Sell GBP/USD
- Take Profit: 1.2000
- Stop Loss: 1.2300
- Timeframe: 1-2 days
Bullish Signal (Counter-Trend):
- Buy GBP/USD
- Take Profit: 1.2300
- Stop Loss: 1.2050
Analysis:
The fundamental divergence between the BoE and the Fed, coupled with weak UK economic data, creates a strong bearish outlook for the GBP/USD. The technical indicators also support this view, suggesting the pair is likely to continue its downward trajectory, with a potential target of 1.2000.
Key Takeaways:
- Bearish Momentum: The GBP/USD is experiencing strong bearish momentum due to fundamental and technical factors.
- BoE Dovishness: Weak economic data and lower inflation may push the BoE towards a more dovish monetary policy.
- Fed Hawkishness: The Fed is expected to remain hawkish, supporting the US Dollar.
- Technical Breakdown: Key technical indicators suggest further downside for the GBP/USD pair.
Key words: GBP/USD, forex signal, bearish, Bank of England, Federal Reserve, inflation, UK economy, trading, currency pair, technical analysis, interest rates, dovish, hawkish, forex forecast.
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