Forex Analysis & Reviews: 15.01.2025 - GBP/USD: Analysis and...

15.01.2025 12:51 PM

GBP/USD: Analysis and Forecast

The GBP/USD pair is struggling to capitalize on its modest recovery from the 1.2100 level, the lowest level since November 2023, reached earlier this week.

The intraday decline intensified after the release of weaker-than-expected UK consumer inflation data. However, subdued US dollar momentum is helping the pair hold its ground. According to the UK's Office for National Statistics (ONS), the Consumer Price Index (CPI) grew by 2.5% year-on-year in December, below expectations of a 2.7% increase from 2.6% in November. The core CPI, which excludes food and energy prices, rose by 3.2% during the reporting month, also falling short of the anticipated 3.4% growth and the previous 3.5% reading in November. These weaker inflation figures provide the Bank of England with room to consider lowering interest rates at its upcoming February monetary policy meeting. Additionally, concerns over the UK's fiscal situation and the risk of stagflation—combining high inflation with weak economic growth—are weighing on the British pound.

On the other hand, the US dollar reached a new weekly low following softer-than-expected US Producer Price Index (PPI) data released on Tuesday, complicating predictions for the Federal Reserve's next rate move. The PPI, which measures wholesale inflation, rose by 0.2% in December, while the core PPI remained unchanged for the reporting period. Optimism stemming from easing fears about US President-elect Donald Trump's potential trade tariffs also supports stock markets and undermines the dollar's safe-haven appeal, which in turn provides some support for the GBP/USD pair.

Nonetheless, expectations that the Federal Reserve may pause its rate-cutting cycle later this month have been a key driver of recent gains in US Treasury yields, limiting the US dollar's losses.

For better trading opportunities today, attention should turn to the upcoming release of the US Consumer Price Index (CPI), due early in the North American session. The CPI report, a critical indicator of US inflation, will influence Federal Reserve rate expectations and play a key role in shaping the short-term dynamics of the US dollar. This could provide fresh momentum for the GBP/USD pair. Therefore, it would be prudent to await confirmation of strong buying before initiating new long positions in GBP/USD.

From a technical perspective, GBP/USD has stabilized above the 1.2200 level. However, bulls need to see a sustained move beyond the 100-hour Simple Moving Average (SMA) and 100-hour Exponential Moving Average (EMA) before taking new long positions. If achieved, prices could accelerate northward toward the next psychological resistance level at 1.2300.

Conversely, a drop below the 1.2200 round level could continue to attract buyers in the 1.2150–1.2140 zone, given the slightly oversold Relative Strength Index (RSI) on the daily chart. However, selling pressure below this area would expose the more-than-one-year low reached on Monday. A convincing break below that level could serve as a new trigger for bearish momentum.