|

GBP/USD tumbles under 1.3400 as soft CPI all but guarantees BoE easing

  • GBP/USD drops as UK CPI falls sharply, with expectations for a BoE rate cut justified.
  • Markets fully price a 25-bps BoE cut to 3.75% on Thursday.
  • US Dollar firms as Fed officials sound cautious, shifting focus to US CPI and jobless claims data.

GBP/USD drops below 1.3400 on Wednesday as the latest inflation report in the United Kingdom (UK) dipped sharply ahead of the Bank of England’s (BoE) monetary policy decision on Thursday. At the time of writing, the pair hovers around 1.3350, down 0.48%.

Sterling tumbles as November CPI undershoots forecasts

The US economic docket remains scarce, with Fed officials crossing the wires. Governor Christopher Waller —who would be interviewed by the US President Donald Trump for the top Fed Chair job — said that rate cuts have positively impacted the employment sector. He added that “inflation is unlikely to pick up again,” and that rates are 50 to 100 bps above neutral levels, but there’s no need for immediate rate cuts.

In the meantime, UK Consumer Price Index (CPI) in November dipped from 0.4% MoM to -0.2% below estimates of 0%. On an annual basis, CPI fell from 3.6% to 3.2%, missing forecasts for a drop to 3.5%.

After the data, market participants had fully priced in a BoE rate cut on Thursday, which would leave the Bank Rate at 3.75% towards the end of the year. For 2026, investors had priced in 65 bps of cuts.

The US economic docket will feature the release of the US CPI on Thursday, along with Initial Jobless Claims data for the week ending on December 13, with estimates suggesting that 225K Americans filed for unemployment benefits.

GBP/USD Price Forecast: Technical outlook

The GBP/USD upward-to-neutral bias remains intact, but inflation data prompted investors to push the pair towards a daily low of 1.3311 before trimming some of those losses. Although momentum in the short-term turned slightly bearish, the Relative Strength Index (RSI) remains bullish, an indication that further upside is seen.

If GBP/USD ends the day above 1.3400, expect some sideways price action ahead of the BoE’s decision. On the flip side, if the pair tumbles below the latter, it could fall towards the 200-day SMA at 1.3345, followed by the 1.3300 figure.

GBP/USD daily chart

Pound Sterling Price This week

The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the Australian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.09%-0.02%-0.26%0.08%0.52%0.28%-0.23%
EUR0.09%0.09%-0.18%0.16%0.64%0.37%-0.13%
GBP0.02%-0.09%-0.17%0.09%0.56%0.29%-0.21%
JPY0.26%0.18%0.17%0.34%0.80%0.53%0.25%
CAD-0.08%-0.16%-0.09%-0.34%0.46%0.20%-0.16%
AUD-0.52%-0.64%-0.56%-0.80%-0.46%-0.26%-0.76%
NZD-0.28%-0.37%-0.29%-0.53%-0.20%0.26%-0.51%
CHF0.23%0.13%0.21%-0.25%0.16%0.76%0.51%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

More from Christian Borjon Valencia
Share:

Editor's Picks

EUR/USD accelerates losses, focus is on 1.1800

EUR/USD’s selling pressure is gathering pace now, opening the door to a potential test of the key 1.1800 region sooner rather than later. The pair’s pullback comes on the back of marked gains in the US Dollar following US data releases and the publication of the FOMC Minutes later in the day.

GBP/USD turns negative near 1.3540

GBP/USD reverses its initial upside momentum and is now adding to previous declines, revisiting at the same time the 1.3540 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.

Gold picks pace, flirts with $5,000

Gold is back on the front foot on Wednesday, shaking off part of the early week softness and pushing higher towards the key $5,000 mark per troy ounce. The move comes ahead of the FOMC Minutes and is unfolding despite an intense rebound in the US Dollar.

Fed Minutes to shed light on January hold decision amid hawkish rate outlook

The Minutes of the Fed’s January 27-28 monetary policy meeting will be published today. Details of discussions on the decision to leave the policy rate unchanged will be scrutinized by investors.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Sui extends sideways action ahead of Grayscale’s GSUI ETF launch

Sui is extending its downtrend for the second consecutive day, trading at 0.95 at the time of writing on Wednesday. The Layer-1 token is down over 16% in February and approximately 34% from the start of the year, aligning with the overall bearish sentiment across the crypto market.