GBP/USD Forecast: UK Inflation Steadies, US Inflation Rises

• Annual inflation in the UK maintained at the rate of 4.0%.

• The US released an upbeat inflation report showing persistent inflation.

• The possible timing for Fed rate cuts has gradually moved from March to May and now June.

Today’s GBP/USD forecast paints a bearish outlook as the currency dips following the news of stable UK inflation figures for January. This brought both surprise and relief to the Bank of England, especially considering economists’ predictions had leaned towards an increase.

–Are you interested to learn more about forex options trading? Check our detailed guide-

Meanwhile, data released Tuesday in the US revealed a rise in inflation. Consequently, there was a decline in rate cut expectations.

Annual inflation in the UK maintained at the rate of 4.0%. This figure came as a surprise to economists who had expected an increase of 4.2%. Therefore, it was a relief for the Bank of England, which is looking to cut interest rates. Moreover, it indicates that inflation will likely decline in the coming months. 

On the other hand, the US released an upbeat inflation report, showing persistent inflation. The annual figure fell. However, the decline was much less than economists had expected. Additionally, the monthly core inflation rose to 0.4%, beating forecasts and showing the economy was still hot.

The dollar soared right after the report as investors scaled back bets for rate cuts in the US. The possible timing for Fed rate cuts has gradually moved from March to May and now June. This change came as the US economy continued showing resilience in 2024 despite high interest rates. Moreover, policymakers are not in a hurry to cut rates.

The contrast in inflation outcomes in the UK and the US further contributed to the decline in GBP/USD. 

GBP/USD key events today

• A speech from BOE Gov Bailey 

GBP/USD technical forecast: Bears eye 1.2520 support in strong move

On the charts, GBP/USD is in a strong bearish move, heading for the 1.2520 support level. Initially, the pair made a solid, impulsive move from the 1.2771 level to the 1.2520 level. Afterward, a corrective move got to the 0.618 Fib retracement level, retracing the previous bearish move. 

-If you are interested in knowing about scalping forex brokers, then read our guidelines to get started-

At this Fib level, bears made an engulfing candle that signaled the continuation of the previous bearish move. Moreover, the price broke out of its corrective pattern, pushing far below the 30-SMA. However, bears must break below the 1.2520 support to make a new low and confirm a downtrend.

Looking to trade forex now? Invest at eToro!

68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.