GBP/USD Price Analysis: Pound Resumes its Post-Inflation Slide

  • The pound continued its slide following a brief respite on Thursday.
  • The dollar was weak after data increased bets for Fed rate cuts.
  • Recent data revealed a notable cooling of British inflation in October.

Friday’s GBP/USD price analysis shows a bearish tone persists as the pound continues its slide, following a brief respite on Thursday. This decline started after the poor UK inflation report. Similarly, the dollar was weak after recent data increased bets for Fed rate cuts. 

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Recent data revealed a notable cooling of British inflation in October. It marked its fastest decline in over 30 years. Moreover, it reinforced expectations of BoE interest rate cuts by mid-next year. However, the BoE emphasized it is far from reducing rates from their 15-year high, even as the economy hovers near a recession.

Notably, Deputy Governor Dave Ramsden indicated Thursday that the Bank of England would likely maintain high interest rates for an extended period. Still, financial markets predict the BoE might commence rate cuts in May or June next year. Furthermore, three quarter-point cuts are anticipated by the end of 2024.

Meanwhile, in the US, new claims for unemployment benefits rose to a three-month high. This indicates a gradual cooling of the labor market and supports the Federal Reserve’s fight against inflation. 

Consequently, the dollar weakened against a basket of currencies, and US Treasury prices rose, nearing two-month lows. Additionally, the series of inflation-friendly data has led financial markets to anticipate an interest rate cut in May. Since March 2022, the Fed has raised its policy rate by 525 basis points.

GBP/USD key events today

  • The US building permits report for October.

GBP/USD technical price analysis: Price moves to challenge the 1.2401 support level.

GBP/USD 4-hour chart

The pound has declined from highs hit near the 1.2501 key level. The price is now attempting to breach the 1.2401 support level. However, bulls are still stronger as the price is above the 30-SMA. Additionally, the RSI is slightly above 50, supporting bullish momentum. 

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Bears must break below the 1.2401 support level and the 30-SMA for this bias to change. This would then signal a shift in sentiment to bearish. Moreover, it would allow the price to retest the 1.2300 level. However, if the bullish bias holds, the price will bounce off the SMA to a new high above the 1.2501 resistance level.

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