- British wages minus bonuses rose much more slowly than expected.
- Investors expect a bigger cut of 74 basis points by the BoE this year.
- Investors are getting ready to receive the US CPI report showing the state of consumer inflation.
This Tuesday, GBP/USD price analysis takes a bearish turn as soft UK labor market data fuels bets on a BoE rate cut. Meanwhile, the dollar held steady ahead of the US Consumer Price Index (CPI) report, which weighed on the Fed’s rate cut decision.
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In particular, data on Tuesday revealed that British wages minus bonuses rose much more slowly than expected in the three months to January. At the same time, the unemployment rate rose unexpectedly. The report raised hopes that the Bank of England will start cutting rates this year. As a result, the pound slipped, retreating sharply from recent highs.
The pound’s recent gains came as traders gained confidence that the Fed would cut rates ahead of the BoE. Markets believe the BoE will be among the last major banks to cut rates. As a result, the pound strengthened due to differences in political outlook.
However, after the jobs data, investors expect a bigger cut of 74 basis points from the BoE this year. This increase from 67bps before the data brought the Fed closer to a 75bps cut. This means that the pound is losing some of its advantage.
At the same time, investors are preparing to receive the US CPI report showing the state of consumer inflation. The higher-than-expected figure could dampen Fed rate cut expectations. Meanwhile, falling inflation may increase bets on a rate cut.
GBP/USD key events today
- US Core CPI m/m
- US CPI m/m
- US CPI y/y
GBP/USD Price Technical Analysis: Bears are challenging the uptrend at the 30-SMA support
On the charts, the pound fell to the 30-SMA after failing to trade above the 1.2850 resistance level. Meanwhile, the RSI broke below 50, indicating a shift in bearish sentiment. With stronger bearish momentum, the price is likely to break below the 30-SMA soon to retest the support level at 1.2750.
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However, the price must break below 1.2750 to confirm a bearish reversal and make lower highs and lows. However, the bullish trend will continue if the price fails to break below the 30-SMA or 1.2750. Bulls could make a new high at the key psychological level of 1.2900 if they regain momentum.
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