The GBP/USD pair encountered fresh selling pressure on Tuesday, dropping to the 1.2500 area, its lowest point since May 2024, during the Asian session. However, it managed to recover slightly, trading around the mid-1.2500s, down just over 0.10% for the day. Despite an overall bullish sentiment in global markets, the pair remains weighed down by USD strength and geopolitical uncertainties.
US Dollar Moves Amid Geopolitical Tensions and Speculation on US Economic Policy
The US Dollar (USD) struggled to gain significant traction despite modest intraday gains, as underlying market sentiment remained bullish. While the USD found some support amid speculations about US President-elect Donald Trump’s inflationary policies and the Federal Reserve’s slow rate cuts, its overall upside potential remained limited. Concerns about rising US Treasury bond yields and persistent geopolitical risks—particularly the Russia-Ukraine conflict and tensions in the Middle East—continue to support the USD, acting as a cap on any meaningful upside for the GBP/USD pair.
Bank of England‘s Caution Supports the Pound
On the British Pound (GBP) side, bearish traders have been cautious, with reduced expectations for an imminent rate cut from the Bank of England (BoE). Recent data showed that underlying inflation in the UK accelerated to a 2.3% YoY rate in October, signaling that the BoE may take a more cautious approach regarding rate cuts. This could offer some support to the GBP in the near term, preventing a more substantial decline against the USD.
Looking Ahead: FOMC Minutes and Key US Economic Data
Investors are now awaiting the release of the Federal Open Market Committee (FOMC) meeting minutes, which will provide insights into the Fed‘s future rate-cut path. Later this week, market attention will shift to key US data, including the first revision of Q3 GDP growth and the US Personal Consumption Expenditure (PCE) Price Index. These data points could influence the USD’s direction and offer more clarity on the GBP/USD pair’s outlook.
Technical Outlook for GBP/USD
The GBP/USD pair faces near-term pressure, with 1.2500 acting as a key psychological support level. A sustained break below this level could open the door for further declines. However, any recovery may find resistance near 1.2600 or higher, depending on the upcoming economic data and Fed’s policy direction. A cautious BoE stance may provide some support for the GBP, but broader USD strength driven by geopolitical risks and inflation concerns could limit any significant recovery in the pair.
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