GBP/USD price steadies near 1.2200 amid dovish BoE bets and weak UK data
GBP/USD stabilizes around 1.2200 amid UK economic weakness
The GBP/USD pair hovers near 1.2200 during Thursday’s European session, following a week of volatile trading. The Pound Sterling (GBP) remains under pressure due to weaker-than-expected UK economic data and mounting dovish bets for the Bank of England (BoE).
The United Kingdom’s Gross Domestic Product (GDP) expanded by only 0.1% in November, falling short of the 0.2% forecast. Meanwhile, industrial and manufacturing production contracted on both monthly and annual bases, with manufacturing output declining by 0.3% month-over-month in November.
Adding to the bearish sentiment, UK factory activity continues to weaken as producers brace for potentially higher global tariffs under the incoming Trump administration. Market participants now expect the BoE to cut its interest rate by 25 basis points to 4.5% at its February policy meeting, reflecting ongoing economic challenges.
GBP/USD price dynamics (Dec 2024 - Jan 2025) Source: TradingView.
U.S. dollar stabilizes as markets assess inflation and rate cuts
The US dollar (USD) consolidated near 109.00 as traders evaluated the Federal Reserve’s next policy steps. December’s U.S. inflation data, which showed Core CPI rising 3.2% year-over-year, slightly below the expected 3.3%, has increased market speculation of more than one Fed rate cut in 2025. The CME FedWatch tool suggests a 70% probability of the Fed initiating rate reductions in June.
Despite the cooler inflation data, the dollar’s downside has been limited by cautious market sentiment ahead of U.S. Initial Jobless Claims and Retail Sales data for December, which are expected to provide further direction for monetary policy.
Technical outlook: bearish momentum persists
Technically, the GBP/USD outlook remains bearish, with the 20-day EMA trending downward near 1.2390. The Relative Strength Index (RSI) hovers near oversold territory, suggesting limited upside potential. Immediate support lies near 1.2050, while resistance is expected at the 20-day EMA.
In our previous analysis, we discussed GBP/USD’s struggle to recover from multi-day lows amid concerns over UK fiscal challenges and subdued factory output. These issues continue to shape the pair's trajectory in early 2025.
