- Three BoE policymakers were ready to lower borrowing costs.
- Data revealed that UK retail sales missed forecasts, increasing by 0.2%.
- The US economy expanded by 3.1% in the fourth quarter, above estimates of 2.8%.
The GBP/USD outlook shows growing enthusiasm among pound bears as Bank of England rate cut expectations increase. At the same time, expectations for fewer rate cuts in the US in 2025 have boosted the dollar, further weighing on sterling.
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The pound collapsed to new lows on Thursday after the Bank of England policy meeting. Although the central bank kept interest rates unchanged, there was a shift in sentiment among some policymakers. Three policymakers were ready to lower borrowing costs, which was unexpected. As a result, markets increase bets for rate cuts in 2025.
Recent economic data have pointed to a recovering labor market and high inflation. Consequently, market participants were pricing a gradual easing pace in the coming year. However, if three policymakers were ready to cut rates in December, the number might increase at the next meeting.
Meanwhile, data revealed that UK retail sales missed forecasts, increasing by 0.2%. Economists had expected a 0.5% increase. The miss was a sign that consumer spending dropped, which could put more pressure on the Bank of England to lower borrowing costs.
On the other hand, the dollar remained strong after the Fed projected fewer rate cuts in 2025. At the same time, data on Thursday revealed that the US economy expanded by 3.1% in the fourth quarter, above estimates of 2.8%. Moreover, unemployment claims fell more than expected, showing a resilient economy.
GBP/USD key events today
GBP/USD technical outlook: Bears prompt 100% retracement
On the technical side, the GBP/USD price has made a sharp move from the 30-SMA to the 1.2500 key support level. The decline has put the price well below the 30-SMA and the RSI near the oversold region, supporting a bearish bias.
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Previously, the price traded in a shallow bullish trend but reversed when it broke below its support trendline. Since then, bears have been in the lead, making lower highs and lows. The most recent move has made a 100% retracement of the previous bullish trend.
Therefore, a break below the 1.2500 support will be a significant milestone for bears. It will signal a continuation of the bearish trend that was there before bulls prompted a corrective move.
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