The Pound Sterling (GBP) dipped against the US Dollar (USD) on Wednesday, trading at 1.2750 in the London session. This decline comes after a strong run that saw GBP/USD reach a new 10-week high of 1.2800 on Tuesday.
Market Dynamics:
- Softer UK Inflation: Data from the British Retail Consortium (BRC) revealed a significant slowdown in UK shop price inflation for May. This raises expectations of potential rate cuts from the Bank of England (BoE) in the future.
- BoE Rate Cut Bets: Market participants now anticipate the BoE’s first rate cut could come as early as August, given the softer inflation outlook.
- US Dollar Rebound: The USD finds some support after recent weakness, as investors await the release of key US inflation data on Friday.
Technical Analysis (GBP/USD):
- Correction from Resistance: GBP/USD faces selling pressure near the 1.2800 resistance level. This pullback is likely a temporary correction.
- Fibonacci Support: The GBP/USD pair remains supported by the 61.8% Fibonacci retracement level (1.2670), indicating a potentially bullish continuation in the near term.
- Upward Trend: The GBP/USD maintains a bullish bias, with all short-term and long-term Exponential Moving Averages (EMAs) sloping upwards.
- RSI Indicator: The 14-period Relative Strength Index (RSI) remains in bullish territory (60.00-80.00), suggesting continued upside momentum.
The recent dip in the Pound Sterling reflects a response to softer UK inflation data. However, the technical indicators maintain a bullish outlook for GBP/USD. The release of US inflation data on Friday will be a key factor influencing the Pound’s future direction.
