GBP/USD Faces Mild Pullback but Downside Limited as US CPI Looms

Key Highlights:

GBP/USD dips slightly after reaching a multi-month high near 1.2965 as traders adjust positions ahead of US inflation data.
Market sentiment expects the Federal Reserve (Fed) to maintain dovish policies, limiting the US Dollar recovery.
The Bank of England (BoE) is expected to cut rates at a slower pace than the Fed, offering support to GBP.

GBP/USD Price Movement: Awaiting US CPI Data

The GBP/USD pair is experiencing a modest pullback in the Asian session on Wednesday, slipping to the 1.2935 region after rallying to its highest level since mid-October at 1.2965. The decline appears limited, as traders remain cautious ahead of the release of the US Consumer Price Index (CPI) report.

The US CPI data will be crucial in shaping market expectations regarding the Fed’s rate-cut path, which will, in turn, impact the demand for the US Dollar and provide fresh direction for GBP/USD.

USD Faces Headwinds as Rate Cut Bets Grow

Despite today’s mild USD rebound, its upside remains constrained due to mounting expectations that the Fed will reduce interest rates multiple times this year. These expectations stem from concerns that higher tariffs under President Trump may slow US economic growth, compelling the Fed to maintain an accommodative stance.

Additionally, the UK’s interest rate outlook further supports the British Pound (GBP). Market analysts expect the BoE to cut rates at a slower pace than the Fed, making GBP more attractive compared to the USD.

Technical Outlook: Bullish Momentum Holds

From a technical perspective, GBP/USD remains firmly bullish after last week’s breakout above the key 200-day Simple Moving Average (SMA). This breakout has solidified the pair’s upside momentum, suggesting that any downside correction could be limited and potentially offer buying opportunities.

Immediate Resistance: 1.2965 (recent multi-month high)
Key Support Levels: 1.2900, followed by 1.2860

If the US CPI data signals easing inflation, it could reinforce Fed rate cut bets, leading to further USD weakness and pushing GBP/USD toward the 1.3000 level.

Conclusion: GBP/USD’s Uptrend Intact Despite Pullback

The GBP/USD pair continues to display strong bullish momentum, with only minor corrections ahead of critical US inflation data. With the BoE expected to lag behind the Fed in rate cuts, the British Pound remains well-supported, keeping GBP/USD’s uptrend intact.

📊 Traders should monitor the US CPI report closely, as it could be the next major catalyst for GBP/USD’s direction. 🚀

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Hamza Shah