GBP/USD Price Forecast - Pound Under Pressure as Softer UK CPI Drags Cable Back Toward 1.33

GBP/USD: Softer UK CPI Knocks Cable Off 1.34, Sellers Test the 1.33 Floor

Macro shock: UK CPI at 3.2% forces a faster BoE pivot

The move in GBP/USD starts with the UK inflation print. Headline CPI fell to 3.2% YoY in November from 3.6%, under the 3.5% consensus. On a monthly basis, prices dropped 0.2% after a 0.3% rise, a clear disinflation signal. Core CPI eased to 3.2% YoY from 3.4%. The retail price index slowed from 4.3% to 3.8%, while PPI output cooled from 3.6% to 3.4%. This sequence gives the Bank of England room to accelerate easing. The policy rate has already been cut from 5.25% (Aug 2024) to 4.00%, and markets now treat another 25 bp cut this week as almost certain, taking Bank Rate to 3.75% while inflation remains above 2%. Traders now price roughly ~69 bp of cuts through 2026, up from ~67 bp pre-CPI, and bring the next full 25 bp cut after this week forward to April 2026 from July 2026. Short term, that is negative for GBP, but the UK still runs higher inflation than peers and keeps real rates positive.

UK labour data: 5.1% unemployment caps any hawkish BoE pushback

The labour market closes the door on any near-term BoE hawkish surprise. The unemployment rate rose to 5.1% from 5.0%, the highest in almost five years. Average earnings including bonuses slowed to 4.7% from 4.9%. The combination of 3.2% headline CPI, 3.2% core, and joblessness grinding higher reinforces the case for further easing. For GBP, this means that any rallies driven purely by “sticky inflation” narratives will be faded quickly unless activity data materially improve.

Dollar side: DXY recovery, 3.0% US CPI risk and Fed on hold

On the USD leg, the move is smaller but directionally important. The Dollar Index has bounced back toward 98.60 after a 10-week low. The latest US jobs data showed only 64k payroll gains in November and unemployment at 4.6%, but markets largely shrugged off the softer elements because of distortions from the prolonged government shutdown. The Fed has already cut three times this year, leaving the target band around 3.50–3.75%, and is widely expected to hold rates in January. The next catalyst is US CPI, where the median expectation is 3.0% YoY. A 3.0–3.1% print keeps the slow-cut path intact and supports a broadly range-bound dollar; a softer number would reopen downside in the dollar and give GBP/USD some air. For now, the modest DXY rebound plus BoE repricing is enough to lean against GBP.

Short-term tape: break below 1.3350 flips GBP/USD into a sellers’ market

Spot GBP/USD trades around 1.3330, down roughly 0.7% on the day and just above the intraday low near 1.3310. On the hourly chart, price has broken below both the 100-hour and 200-hour moving averages for the first time since 24 November, with those averages now rolling over above spot and acting as dynamic resistance. The short-term regime has flipped from buy-the-dip to sell-the-rally as long as cable stays beneath this moving-average cluster. On the daily chart, the confluence of the 100-day and 200-day moving averages in the 1.3345–1.3359 area is being threatened from below; a clean close under that band would confirm a renewed medium-term bearish tilt. Immediate support stands at 1.3300, then 1.3270, with deeper support around 1.3200. On some 4-hour views, RSI sits below 40, close to oversold, which means incremental downside from 1.33 into 1.3270–1.3200 will be harder work than the slide from 1.3460.

Medium-term structure: bullish base from 1.3000–1.3100 still argues for 1.35–1.37

Zooming out, the broader structure for GBP/USD is less negative than today’s tape suggests. From the November base near 1.3000–1.3100, the pair rallied to about 1.3460, printing higher lows and sketching an inverse head-and-shoulders-type formation on the daily chart. Price has been trading above the 15-day moving average at 1.3325 and the 20-day at 1.3278, with both sloping higher before today’s break. At the recent high, daily RSI (14) was around 63.05, strong upside momentum but still below overbought. The de-facto neckline sits in the 1.3350–1.3400 band, which is now being retested from above. As long as 1.3200 holds on a daily closing basis and the 15/20-day averages do not fully roll over, that pattern still points toward another run at 1.3500, and potentially 1.3600–1.3725 as an extended objective.

Positioning and rate differentials: why GBP downside is not open-ended

Rate and macro differentials argue against a one-way collapse in GBP/USD. The UK runs 3.2% headline CPI, 3.2% core, 4.4% services inflation, and 5.1% unemployment, with Bank Rate moving from 5.25% down to 4.00% and likely 3.75% this week. The US faces CPI expected near 3.0%, unemployment at 4.6%, and a Fed funds range of 3.50–3.75% after three cuts, with only one more move pencilled in late 2026. UK inflation remains higher than most peers, and BoE easing expectations are still more cautious than those for the Fed over the longer horizon, which limits the justification for aggressively shorting GBP/USD on a structural basis. Market behaviour reflects this: GBP still attracts flows on risk-on days, options markets show interest in upside hedges around 1.34–1.35, and retail positioning is not heavily skewed. The result is a two-way market where data surprises dictate direction, not a simple grind lower.

Trading stance on GBP/USD: tactical Sell now, strategic Buy near 1.3200–1.3270

Combining macro and technicals, GBP/USD has rolled over from 1.3460 to roughly 1.3330, with the 1.3350 area now behaving as resistance instead of support. Intraday structure favours sellers below the 100/200-hour moving averages, and downside magnets sit at 1.3300, 1.3270, and then 1.3200, especially if US CPI prints firm or the BoE leans more dovish than priced. At the same time, the medium-term base from 1.3000–1.3100 and the inverse head-and-shoulders setup still argue for another test of 1.3500–1.3600 once this correction exhausts. Short term, the bias is Sell around 1.3330–1.3350 targeting 1.3300–1.3270–1.3200; strategically, dips into 1.3200–1.3270 look like buy zones as long as UK data do not collapse and the BoE avoids signalling an aggressive multi-cut cycle beyond what is already priced.

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