GBP/USD Price Analysis: Will GBP/USD Break 1.25 After US Inflation Data?
The GBP/USD pair began the European trading session on a muted note, trading just above the mid-1.2500s.
This range-bound movement comes as the US Dollar (USD) continues to find support despite easing slightly from its recent two-year high. Last week’s Personal Consumption Expenditure (PCE) Price Index for November showed signs of inflation easing in the US, offering temporary relief to the greenback’s dominance. However, the Federal Reserve’s hawkish stance and slower-than-expected rate cuts projected for 2025 keep the USD supported, limiting any significant gains for the British Pound.
At the same time, the Bank of England (BoE) has adopted a more dovish tone, creating additional pressure for the GBP. The BoE’s decision to hold rates steady and its downgraded economic outlook for Q4 2024 have left investors cautious. Moreover, a split vote within the BoE’s Monetary Policy Committee (MPC) signals uncertainty about future rate moves, further restraining bullish sentiment around the GBP/USD pair.
USD Supported by Fed Stance and Global Tensions
Despite easing inflation pressures, the Federal Reserve’s outlook remains a key factor in sustaining USD strength. The central bank recently lowered rates by 25 basis points but indicated a cautious approach to future rate adjustments in 2025. Additionally, elevated US Treasury yields and geopolitical tensions, including the Russia-Ukraine war and unrest in the Middle East, bolster demand for the safe-haven USD.
Meanwhile, traders are eyeing key events for clearer direction, including the BoE’s Quarterly Bulletin and the US Consumer Confidence Index. The cautious market sentiment is likely to persist as investors assess the mixed signals from both currencies.
BoE’s Dovish Approach Limits GBP Gains
The BoE’s decision to hold rates steady has raised concerns about the UK economy’s trajectory. Three MPC members voted for rate cuts, highlighting divisions among policymakers. Adding to this, the BoE downgraded its economic growth forecast for Q4 2024, signaling potential headwinds for the British economy. This dovish tone keeps the GBP under pressure and caps potential upside in the GBP/USD pair.
Until clear signals emerge from economic data or central bank policy, the pair is expected to remain range-bound. Traders should exercise caution and wait for sustained movements to confirm directional trends.
GBP/USD Price Analysis: Technical Outlook
The GBP/USD pair is trading at $1.2525, reflecting a 0.05% decline over the last 24 hours. The pair remains under bearish pressure, with the price struggling below the 50-day EMA at $1.2588.
The pivot point at $1.2588 serves as immediate resistance, and further resistance levels lie at $1.2629 and $1.2680. On the downside, $1.2478 is immediate support, followed by $1.2441 and a critical zone near $1.2406.
The RSI stands at 41.29, signaling bearish momentum as it hovers closer to oversold territory. The pair’s failure to breach the downward trendline reinforces bearish sentiment, keeping sellers in control. A break below $1.2478 could trigger further downside toward $1.2406, while a recovery above $1.2588 might signal potential bullish reversal.
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