Daily Price Outlook
During the European trading session, the GBP/USD currency pair has maintained its upward trend and remained well bid around 1.2544, hitting the intra-day high of 1.2544. However, the reason for its upward trend could be attributed to the US Dollar losing some of its strength.
The Dollar weakened after US President Donald Trump decided to delay tariffs on Canada and Mexico. This move helped reduce some of the market’s worries about global trade tensions, making the Dollar less attractive to investors.
As a result, the British Pound gained against the US Dollar. Although the Pound is underperforming against most other currencies, it was able to find support against the Dollar due to the Dollar’s decline.
In addition to this, traders are cautious ahead of the Bank of England's (BoE) decision, which is expected tomorrow. This has added some uncertainty to the market, and investors are closely watching how the BoE will adjust its policy.
GBP Under Pressure Ahead of Bank of England Rate Cut Decision
On the GBP front, the Pound (GBP) has been underperforming compared to most of its major peers, except the US Dollar (USD), as investors become more cautious ahead of the Bank of England’s (BoE) decision on Thursday.
The BoE is expected to cut its key borrowing rate by 25 basis points (bps), lowering it to 4.50%. This would be the third rate cut in the current cycle. However, one BoE member, Catherine Mann, who is known for her hawkish views, might vote to keep the rate at 4.75%.
The main reason for this expected rate cut is that inflation in the UK has slowed down more than expected, especially in the services sector, which is closely watched by the BoE. In December, inflation in services rose by 4.4%, down from 5% in November.
Additionally, December's Retail Sales data showed a significant drop, which has further convinced traders that the BoE will ease its policy to help the economy.
Looking ahead, market participants are betting that the BoE may continue cutting rates by around 56 bps in total throughout the year, beyond this Thursday’s decision.
As a result, the GBP/USD pair is under pressure, as the anticipated rate cuts reduce the appeal of the Pound, while the US Dollar remains strong, holding its ground in the market.
GBP/USD – Technical Analysis
The GBP/USD pair is trading at $1.24667, down 0.09%, reflecting a cautious bearish sentiment as it struggles below the pivot point at $1.24915. The pair’s inability to maintain momentum above this level suggests sustained selling pressure.
Immediate resistance is noted at $1.25229, with additional barriers at $1.25629 and $1.26212. A break above these resistance levels could signal a potential shift toward a bullish outlook.
On the downside, immediate support is seen at $1.24281. A decisive move below this threshold could accelerate bearish momentum, targeting $1.23780 and potentially $1.23236. The 50-day Exponential Moving Average (EMA) at $1.24131 acts as a dynamic support, reinforcing the bearish bias if breached.
Technical indicators suggest a weak bullish recovery, with sellers maintaining control unless the pair closes firmly above the pivot point of $1.24915. The consistent formation of lower highs and lower lows on the 4-hour chart indicates bearish dominance.
Traders should closely monitor price action around $1.24901. A sustained break below this level offers a selling opportunity, with profit targets near $1.24275. A stop-loss above $1.25232 is recommended to manage potential reversals effectively.
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