GBP/USD price forecast: British pound retreats from four-month high ahead of U.S. CPI data
The British pound retreats from its recent peak but holds firm ahead of key U.S. inflation data
The British pound (GBP) is trading around $1.2935, slightly lower after reaching a four-month high of $1.2965 in the previous session. The retreat comes amid investor repositioning ahead of the U.S. Consumer Price Index (CPI) report, which is expected to influence market sentiment regarding the Federal Reserve’s (Fed) next move.
Despite this slight pullback, the downside appears limited, as expectations of a slower Bank of England (BoE) rate-cut cycle continue to support the pound. The Fed is widely anticipated to cut rates multiple times in 2025 amid concerns over a tariff-driven slowdown in the U.S. economy. In contrast, the BoE is expected to reduce rates at a more gradual pace, making GBP an attractive option for traders seeking yield differentials.
GBP/USD price movement (Feb 2025 - Mar 2025) Source: TradingView.
U.S. dollar remains under pressure
The U.S. dollar index (DXY) remains near a four-month low of 103.50, reflecting persistent concerns over the U.S. economic outlook. Market expectations for multiple Fed rate cuts have intensified following weaker economic indicators and inflation uncertainties. Any further signs of cooling inflation from the CPI report could reinforce expectations of monetary easing, keeping the dollar subdued.
Additionally, global markets remain cautious as President Donald Trump’s tariff policies continue to create uncertainty. His latest comments indicate that additional trade restrictions could be imposed in April, further increasing economic risks. This uncertainty, combined with expectations of lower interest rates, has weakened demand for the dollar, benefiting alternative currencies like the pound.
Technical outlook suggests limited downside
From a technical perspective, GBP/USD remains in an uptrend, having broken above its 200-day Simple Moving Average (SMA) last week. This breakout is seen as a key bullish indicator, suggesting that any pullbacks could present buying opportunities rather than signaling a reversal.If GBP/USD remains above the 1.2900 level, it could attempt to retest resistance near 1.2965 and 1.3000. A break above 1.3000 would confirm further upside potential. Conversely, if the pair declines below 1.2900, immediate support lies at 1.2850, followed by stronger support near 1.2780.
Looking ahead, traders will closely monitor the U.S. CPI report and upcoming UK monthly GDP data for further direction. A softer inflation reading could push GBP/USD higher, while stronger-than-expected U.S. data might provide temporary relief for the dollar.
As previously discussed, GBP/USD remains in a consolidation phase below 1.3000, with strong support near 1.2850. The broader trend suggests limited downside, but a break above 1.3 is needed for sustained bullish momentum.
