The GBP/USD currency pair dropped to its lowest point in nearly two months, falling below the 1.3000 level on Wednesday. This decline followed a period of consolidation around the 1.3100 level during the Asian session. The bearish sentiment is expected to persist, particularly as market participants reassess the potential implications of the latest inflation data on the Bank of England’s policy stance.
Recent figures from the UK’s Office for National Statistics indicate a decline in annual inflation, with the Consumer Price Index (CPI) registering a rate of 1.7% for September, down from 2.2% in August. This figure was notably lower than the anticipated 1.9%. Additionally, the Producer Price Index (PPI) experienced a year-on-year decline of 2.3%, while the Retail Price Index showed a modest increase of 2.7%, a significant drop from the 3.5% recorded the previous month.
Market expectations now suggest a 70% likelihood that the Bank of England will implement two consecutive rate cuts of 25 basis points in the coming months, a significant shift from the less than 50% chance seen before the inflation data was released. These developments are likely to weigh heavily on the Pound Sterling, contributing to the downward pressure on the GBP/USD pair.
In terms of technical analysis, the Relative Strength Index (RSI) on the 4-hour chart showed a slight uptick after reaching the oversold territory when GBP/USD dropped below 1.3000. This movement indicates that while the bearish trend remains in play, a potential technical correction may occur before any further declines.
Should the 1.3000 level act as resistance, the next support levels to watch would be 1.2940 and 1.2900. Conversely, if the currency pair manages to stabilize above the 1.3000 mark, resistance could be encountered at 1.3050 and 1.3080, which coincides with the 50-period Simple Moving Average.
