GBP/USD under pressure as markets question Bank of England's stance

The GBP/USD pair remains under pressure, trading around 1.3460, as it contends with a mix of conflicting factors.

In the UK, Bank of England Governor Andrew Bailey stated that inflation is expected to decline next year but confirmed that the central bank's policy will remain restrictive. He pointed to a weakening labour market and cautious consumers, whose savings are twice as high as pre-pandemic levels. Bailey acknowledged that interest rates would likely continue to fall but emphasised that the pace of easing would be strictly dependent on incoming inflation data.

Across the Atlantic, the US dollar is holding its ground following the Fed's rate cut last week. Markets are currently pricing in approximately 43 basis points of additional easing by year-end, although there is no clear consensus on whether a move will occur at the next meeting. Recent comments from Chair Jerome Powell and other Fed officials consistently underscore that any further action will be data-dependent, hinging on fresh inflation and employment figures.

Consequently, the pound is weighed down by domestic economic concerns and the BoE's cautious stance. The dollar, in turn, finds support from expectations of a gradual and measured Fed policy. This creates a stalemate marked by uncertainty, which is clearly reflected in the current range-bound dynamics of GBP/USD.

Technical analysis: GBP/USD

H4 Chart:

On the H4 chart, GBP/USD formed a tight consolidation range around 1.3544 before breaking lower to achieve the local target of the decline at 1.3427. Today, we anticipate the development of a consolidation range above this level. An upward breakout from this range would open the potential for a corrective move towards 1.3544 (testing it as resistance from below). Following this, we would expect the resumption of the downtrend targeting 1.3366. This bearish outlook is technically confirmed by the MACD indicator, whose signal line is located below zero and pointing decisively downward.

H1 Chart:

The H1 chart shows the pair forming the second leg of a downward impulse towards 1.3422, marking a local target. Upon its completion, we anticipate a potential correction towards the 1.3544 level. This scenario is supported by the Stochastic oscillator, with its signal line currently below 80 and falling sharply towards the 20 level.

Conclusion

The GBP/USD pair is caught between a cautious BoE and a data-dependent Fed, leading to a tentative equilibrium. The technical structure leans bearish, suggesting that any near-term rebounds are likely to be corrective within a broader downtrend, contingent on upcoming economic data from both sides of the Atlantic.