British Pound Slides as Softer Inflation Dims BoE Rate Hike Expectations

Traders' Opinions

Summary:

The British Pound remained under pressure on Thursday after weaker UK inflation data and rising fiscal concerns reduced expectations for further Bank of England rate hikes, leaving Sterling on track for a weekly loss against the US Dollar.

SELL GBPUSD

EXP

TRADING

1.33500

Entry Price

1.31800

1.35000

1.33247 -0.00495 -0.37%

0.0

Pips

Flat

1.31800

Exit Price

1.33500

Entry Price

1.35000

The British Pound extended its decline on Thursday, remaining below the 1.3400 mark against the US Dollar as softer inflation data and renewed fiscal concerns continued to weigh on investor sentiment. Sterling is now on course for its weakest weekly performance in several weeks after reversing sharply from last week's highs near 1.3560.

UK inflation slowed to 2.6% year-over-year in June, the weakest reading since March last year, while producer prices also eased more than expected. The weaker inflation figures have reinforced expectations that the Bank of England can afford to keep interest rates unchanged for longer, reducing support for the Pound.

Beyond monetary policy, investors are also becoming increasingly cautious about Prime Minister Andrew Burnham's spending plans. Questions over how the government intends to finance its fiscal commitments have revived concerns about the UK's budget outlook and long-term fiscal credibility.

The combination of fading Bank of England tightening expectations and growing fiscal uncertainty has left Sterling vulnerable, while the US Dollar continues to benefit from expectations that the Federal Reserve may keep interest rates higher for longer.

Technical Analysis

GBP/USD has shifted into a bearish market structure after failing to sustain its rally above the 1.3500 area. On the 4-hour chart, price has broken below a rising trendline that had supported the broader uptrend since late June, confirming a loss of bullish momentum. The pair is now trading around 1.3355, with sellers pressing against a key support zone near 1.3340.

The recent rejection from the 1.3530–1.3550 resistance region marked a significant lower high, triggering a sequence of lower highs and lower lows. This change in structure suggests that bears have regained short-term control. A decisive break below the 1.3340 support area would reinforce the bearish outlook and expose the next downside target around 1.3290, followed by the stronger support zone near 1.3180, where buyers previously stepped in.

On the upside, any recovery is likely to face immediate resistance around the broken support-turned-resistance zone between 1.3385 and 1.3410. Bulls would need to reclaim this area before attempting another move toward 1.3500. Until then, rallies are likely to attract fresh selling pressure rather than signal a trend reversal.

Momentum also favors the downside. Price remains below the broken ascending trendline, indicating weakening buying interest. Although a short-term rebound cannot be ruled out after the recent selloff, the overall structure continues to favor sellers unless the pair can reclaim the 1.3410 resistance area and establish higher highs.

TRADE RECOMMENDATION

SELL GBP/USD

ENTRY PRICE: 1.3350

STOP LOSS: 1.3500

TAKE PROFIT: 1.3180

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British Pound Slides as Softer Inflation Dims BoE Rate Hike Expectations

Technical Analysis

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