|

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

GBP/USD edges lower due to safe-haven demand

GBP/USD inches lower after opening at a bullish gap, trading around 1.3200 during the Asian hours on Monday. The pair loses ground as the Pound Sterling declines against the US Dollar amid emerging safe-haven demand, which could be attributed to the United States-Iran talks uncertainty.

EUR/USD remains stronger despite uncertainty surrounding US-Iran talks

EUR/USD pair maintains its upward momentum for a third consecutive session, trading near 1.1390 during Monday's Asian hours. Despite this positive streak, the Euro’s gains could face headwinds if geopolitical uncertainty sparks a flight to safety, boosting the US Dollar.

Gold remains bid and close to $4,100

Gold accelerates its recovery and approaches the key $4,000 mark per troy ounce at the end of the week, adding to Thursday’s advance. However, expectations for a hawkish Fed remain steady and keep the yellow metal’s potential upside contained.

Week ahead: NFP report to challenge Dollar strength and the hawkish Fed
The end of the Middle East conflict and the steps made so far towards securing a comprehensive deal over the next five weeks – with oil prices dropping aggressively but maintaining a small risk premium – has allowed investors to focus elsewhere. Contrary to expectations, the greenback has been the main protagonist lately.
Week ahead – NFP report to challenge Dollar strength and the hawkish Fed

Dollar strength dominates markets, as the hawkish Fed overshadows geopolitics and lower oil prices. NFP week could drive September Fed hike expectations and boost market volatility. The euro lacks fresh bullish catalysts, all eyes on the preliminary inflation report and the ECB Forum.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.