fell for the fifth day in a row, reaching 1.3445. Slowing headline price growth has fueled expectations of an imminent rate cut by the Bank of England, although underlying price pressures remain strong.
Annual inflation in January slowed to 3.0% from 3.4% in December, in line with forecasts. However, inflation in the services sector, which reflects pressures on domestic prices, only fell from 4.5% to 4.4%, above the expected 4.3%. This partly supported the pound. Earlier, sterling had fallen after weak jobs data raised expectations of a rate cut.
According to Chris Turner, head of global research at ING, the market was expecting a sharper slowdown in inflation, but the data was not clearly weak. A better-than-expected figure for services gave sterling “only limited breathing room.”
Investors now value the prospect of a 25 basis point rate cut by the Bank of England next month at around 85%. At the end of the year, the market fully discounts two reductions of 25 basis points.
The political situation continues to be an additional factor of uncertainty. The upcoming parliamentary by-election in Greater Manchester could reignite discussions over Prime Minister Keir Starmer's leadership in the event of a Labor defeat. According to ING, a major loss for the party could increase pressure on the pound and the government bond market.
Technical analysis
The H4 chart maintains a pronounced bearish trend. After a series of declining highs, the pair broke the 1.3490-1.3500 zone and accelerated its decline to 1.3430-1.3440. The price is moving along the lower band of the Bollinger Bands, confirming the dominance of the sellers.
Local rebound attempts remain weak and are quickly sold. The nearest resistance lies between 1.3490 and 1.3520, followed by 1.3660. Support is at 1.3430; a break below would open the way to further losses.
The first half time frame shows a sharp sell-off on February 19, followed by tight consolidation at the lows. The Bollinger Bands have started to narrow, suggesting that volatility is decreasing after the recent sharp move.
The price remains near 1.3430-1.3450. A sustained move above 1.3490 would allow for a more pronounced corrective pullback. The bearish scenario remains intact as the pair trades below 1.3490.
Conclusion
In summary, GBP/USD remains entrenched in a sustained downtrend, extending its losing streak to five sessions. While headline inflation softened as expected, sticky services inflation and resilient underlying pressures complicate the Bank of England's policy calculus. The market remains firmly eyeing a rate cut in March, with political risks adding to uncertainty. Technically, the pair has broken through key support and is trading with a clear bearish bias. Any corrective bounce is likely to be limited near 1.3490-1.3520, and a break below 1.3430 will open the door to deeper losses. The short-term outlook remains firmly negative unless prices can reclaim the 1.3490 level.
By RoboForex Analysis Department
Disclaimer
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
