Bearish RSI and BoE dovish policy shift weighs GBP/USD price outlook
GBP/USD faces technical barriers near 1.2610 amid dovish BoE policy
The GBP/USD currency pair has been on a notable bearish trajectory throughout the fourth quarter of 2024, weighed down by market reactions to shifting central bank policies and technical price levels.
With the Bank of England (BoE) tilting dovish, the Pound has faced added pressure but the market remains unclear due to the broader landscape of interest rate expectations.
GBP/USD price dynamics (October-December 2024). Source: TradingView.
Following a nine-month low below 1.2490 in late November, the Cable saw a brief recovery driven by a weaker US Dollar. This rebound was capped by resistance at 1.2610, highlighting the pair’s vulnerability to technical barriers. As of today’s European session, GBP/USD trades near 1.2560, maintaining proximity to key support at the psychological 1.2500 level. On the four-hour chart, the Relative Strength Index (RSI) mirrored this volatility, recovering from the oversold 70 level but turning bearish again after failing to sustain above 50.
GBP/USD price outlook: BoE dovish policy weighs on the pound
Market faces challenges as BoE’s dovish split and technical weakness ContinueThe market’s focus remains on monetary policy signals. The BoE’s recent policy announcement revealed a dovish split within its Monetary Policy Committee, with three out of nine members advocating for a 25-basis-point rate cut. This heightened dovish sentiment has led traders to price in a 53-basis-point reduction in rates by 2025, an increase from earlier expectations of 46 basis points. Comparatively, this places the BoE's expected cuts on par with the Federal Reserve’s anticipated actions but below the European Central Bank’s projected adjustments. Such positioning makes the Pound an attractive long-term consideration for investors despite current pressures. Adding to the bearish sentiment, Deutsche Bank forecasts four BoE rate cuts in 2025, one in the first half of the year and three in the latter half highlighting expectations for prolonged monetary easing.
These dovish prospects, coupled with the pair’s technical weakness, suggest continued challenges for GBP/USD in maintaining upward momentum. As the week unfolds, GBP/USD’s near-term outlook hinges on its ability to defend critical support levels amidst a dovish monetary policy backdrop.
The GBP/USD pair dropped below the 1.2600 mark following the Fed's quarter-point rate cut. The Fed’s hawkish stance on future rate cuts supported the U.S. dollar and weighed on the Pound.
