Pound Struggles Ahead of Key UK Data, Rate Cut Expectations Weigh
The Pound Sterling (GBP) is attempting a modest recovery against the US Dollar early Monday, but remains under pressure due to Middle East tensions and increasing expectations for a Bank of England (BoE) rate cut cycle ahead of the Federal Reserve (Fed).
BoE/Fed Rate Cut Outlook
Markets currently anticipate the BoE will initiate rate cuts from August, with the Fed following suit in September. This divergence in central bank outlooks is a bearish factor for GBP/USD.
Critical UK Data Ahead
This week's UK employment and inflation data will offer fresh guidance on potential BoE rate cuts. Tuesday's wage growth figures (for the three months ending in February) are particularly crucial, as they remain a key driver of persistent UK inflation.
Technical Outlook: GBP/USD Bearish Bias, Key Support Breached
A recent breakdown of the psychological support at 1.2500 triggered a sharp selloff in GBP/USD. The pair's long-term trend has turned bearish as it trades below the 200-day Exponential Moving Average (EMA) near 1.2570. The formation of a Head and Shoulder pattern on the daily chart signals further downside potential. A sharply declining Relative Strength Index (RSI) below 40.00 reinforces the bearish momentum.