FxNews—The value of the British pound dropped significantly, going under $1.3 for the first time since August 19. This occurred after the U.K. reported a lower-than-expected inflation rate, which suggests the Bank of England might reduce interest rates further.
Annual inflation decreased to 1.7%, marking the lowest level since April 2021 and below the expected 1.9%. Core inflation also fell from 3.6% to 3.2%, while inflation for services reached a new low since May 2022 at 4.9%.
Bank of England to Cut Rates by 45 Points This Year
Additionally, wage increases are slowing down, reaching the lowest rate in two years, which shows reduced pressure on salaries within the economy. With these developments, investors expect the Bank of England might cut rates by 45 basis points by the end of this year, an increase from the previously expected 37 basis points.
Next month, the central bank will likely reduce borrowing costs by 25 basis points.
Strong Dollar Drives Pound Down Ahead of 2025 Budget
The UK’s upcoming 2025 Budget will provide more details about the government’s policy and tax plans and is also being discussed. The strengthening of the U.S. dollar also influences the pound’s fall, as the Federal Reserve plans to decrease rates more slowly than initially thought.
GBP/USD Technical Analysis – 23-October-2024
The currency pair is under robust selling pressure, testing the $1.295 support as of this writing. Awesome Oscillator signals sell with a red histogram below the zero line. Additionally, the Stochastic and RSI 14 records show the market is not oversold; hence, the downtrend will likely resume.
Overall, the technical indicators suggest that the primary trend of the GBP/USD pair is bearish, and the downtrend will likely resume.
GBPUSD Forecast – 23-October-2024
The immediate support is the October 22 low at $1.295. If sellers close below this mark, the bearish trend will likely resume. In this scenario, the downtrend could spread to the August 13 high at $1.287, backed by the Fair Value Gap (FVG) resistance area.
Please note that the bearish outlook should be invalidated if the GBP/USD price exceeds $1.30 (September 11 Low) critical resistance.
GBPUSD Bullish Scenario
If bulls (buyers) close and stabilize the price above the $1.30 critical resistance, the uptick momentum can potentially target the 100-period SMA of the 4-hour chart near the October 18 high at $1.307.
- Next Read: EUR/USD Targets $1.072 Amid ECB Rate Cuts
GBPUSD Support and Resistance Levels – 23-October-2024
Traders and investors should closely monitor the key levels below to make informed decisions and adjust their strategies accordingly as market conditions shift.
- Support: 1.295 / 1.287
- Resistance: 1.30 / 1.307