Daily Price Outlook
During the European trading session, the GBP/USD currency pair sustained its bullish trend and remained higher around the 1.2419 level, hitting an intra-day high of 1.2422.
However, the reason for this upward trend can be attributed to the strong performance of the British Pound, which gained traction despite the bullish US Dollar.
Normally, a stronger US Dollar puts pressure on GBP/USD, but this time, the Pound showed resilience and even outperformed many other major currencies.
This strength in the Pound comes as investors digest the Bank of England’s (BoE) recent policy stance. The BoE has adopted a more cautious or “dovish” approach, signaling that interest rate cuts could come sooner than expected. At the same time, the central bank lowered its economic growth forecasts for the year.
Despite this, the Pound continues to hold strong, possibly because the market had already priced in these concerns, and investors are now focusing on other factors influencing GBP’s movement.
BoE’s Cautious Stance and Economic Outlook Impact on GBP/USD
On the BoE front, the Pound Sterling has been performing well against its major peers as investors focus on the Bank of England’s (BoE) recent stance. Last week, the BoE lowered interest rates by 0.25% to 4.5%.
BoE Governor Andrew Bailey mentioned that the outlook for monetary policy would be "gradual and cautious," with expectations that inflation in the UK could rise to 3.7% in the third quarter due to higher energy prices, before returning to the target of 2%.
Despite this, investors were surprised by a vote from BoE member Catherine Mann, who called for a larger 0.5% rate cut, signaling a more dovish stance on policy. This shift in tone raised concerns about the UK’s economic outlook, especially as the BoE also reduced its GDP growth forecast for the year to just 0.75%.
Besides this, the comments from BoE Chief Economist Huw Pill emphasized strong wage growth as a reason for caution in cutting rates further. He noted that wages increased by 5.6% in the three months ending November, the highest since June 2024.
Therefore, the BoE’s cautious stance and reduced GDP forecasts create uncertainty, limiting GBP/USD gains. However, strong wage growth supports the Pound. If Andrew Bailey signals further rate cuts in his speech, GBP/USD could weaken, but any hawkish tone may boost the pair.
GBP/USD – Technical Analysis
The GBP/USD pair is trading at $1.24049, down 0.02%, as the market consolidates following recent fluctuations. The 50-day Exponential Moving Average (EMA) at $1.24290 is acting as a resistance level, restricting bullish momentum while the pair struggles to maintain its footing above the pivot point at $1.23668.
With the U.S. dollar showing strength amid shifting macroeconomic conditions, GBP/USD remains vulnerable to further downside pressure.
The pivot point at $1.23668 is a crucial marker for trend direction. Holding above this level keeps the bullish bias intact, with immediate resistance at $1.24599, followed by $1.25374 and $1.25987.
A decisive break above these levels could open the door for a sustained upward move, particularly if market sentiment shifts in favor of the British pound.
On the downside, immediate support is seen at $1.23048, with further weakness potentially extending declines toward $1.22507 and $1.21903.
A failure to defend these levels could accelerate selling pressure, leading to deeper losses. However, a successful hold above $1.23668 may attract buyers, positioning GBP/USD for a possible rebound.
Traders considering a long position should look for entries above $1.23676, targeting $1.24422, with a stop loss at $1.23225 to manage risk effectively. If GBP/USD fails to sustain above the pivot, sellers may take control, driving the pair lower in the short term.
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