GBP/USD Pair Faces Downward Pressure Amidst Rising UK Inflation and US Debt Ceiling Concerns

Bearish View

• Take Profit : 1.2450
• Timeline: 1-2 days

Bullish View

• Buy Stop: 1.2420
• Take Profit: 1.2520
• Stop Loss: 1.2350

The GBP/USD pair has been experiencing a downward trend, primarily influenced by recent developments in the UK’s consumer price index (CPI) and ongoing concerns regarding the US debt ceiling. The latest CPI data from the Office for National Statistics (ONS) revealed a month-on-month increase in the headline CPI from 0.8% to 1.2%, while the year-on-year CPI dropped from 10.1% to 8.7%. Concurrently, core inflation exhibited an upward movement on both a year-on-year and month-on-month basis, rising to 1.3% from the previous month and 6.8% compared to the same period last year. These figures indicate a persistent inflationary trend, potentially prompting the Bank of England to consider further interest rate hikes in the coming months.

Moreover, the GBP/USD pair has been affected by the ongoing negotiations between Democrats and Republicans regarding the expansion of the US debt ceiling. The lack of an agreement has garnered the attention of rating agencies, with the possibility of a credit rating downgrade looming. Fitch has already placed the US on a negative rating watch. However, it is expected that a resolution will be reached between the two parties, potentially over the weekend, which could reverse the strength of the US dollar. Technically, the GBP/USD pair has been following a downward trajectory, breaching the 38.2% Fibonacci retracement level on the 4-hour chart and falling below the 50-period moving average. It is probable that the GBP/USD pair will continue its decline, with the psychological level of 1.2200 serving as the next significant support level. A potential reversal could occur upon signs of progress in the debt ceiling negotiations between Democrats and Republicans.