GBP/USD is currently positioned within the 1.33–1.34 range following a notable two-day movement influenced by UK CPI, the BoE’s decision to cut rates, and a softer US CPI report. The pair was observed trading near 1.3420 in Asia, subsequently dropping to 1.3310 following the UK inflation miss, before recovering to the 1.3370–1.3410 range and testing the 1.3440–1.3455 zone. The upper boundary of the formation is currently identified as the 1.3450–1.3510 resistance zone, whereas buyers have consistently protected the 1.3335–1.3355 range, with increased structural vulnerability only occurring beneath the 1.3290–1.3310 levels. The UK inflation print was clearly weaker, with headline CPI decreasing to 3.2% from 3.6% versus expectations near 3.5%, while core CPI eased to 3.2% from 3.4%. Food inflation fell from 4.9% to 4.2%, and services inflation edged down only marginally from 4.5% to 4.4%, remaining more than 2 percentage points above the 2.0% target.
In response, the BoE reduced the Bank Rate by 25 bps from 4.00% to 3.75% in a narrow 5–4 vote, highlighting a lack of consensus on committing to a full easing cycle. Markets are pricing this cut alongside at least two additional moves in 2026, with some forecasts projecting up to three more 25 bp cuts, potentially totaling 75 bps of further easing. However, with headline inflation at 3.2% and services inflation still elevated, that path is far from guaranteed. The split vote and cautious language in the minutes limit the dovish interpretation, explaining why GBP avoided a typical post-cut selloff. The communication around the decision reflects deliberate internal tension: while acknowledging cooling labor conditions and easing inflation from the September peak near 3.8%, the BoE continues to stress discomfort with services inflation. Nearly half the committee views current easing as premature, giving the bank flexibility to pause if inflation pressures re-emerge, a nuance that matters more for GBP/USD than the headline rate cut itself.
On the US side, incoming data continues to undermine the dollar leg of the pair. Headline CPI has declined to 2.7% year-on-year from 3.0%, while core CPI eased to 2.6% from 3.0%. Labor market data shows gradual cooling without outright deterioration, with initial jobless claims at 224k and the four-week average around 217–218k. This environment allows the Fed to maintain a restrictive stance without urgency to cut, but it removes the inflation premium that previously supported the dollar. Fed-funds futures imply roughly 62 bps of easing in 2026, signaling a slow pivot rather than aggressive accommodation. As a result, the DXY trades near 98.3–98.4 within a descending channel that has been intact since late November. Technically, the index is consolidating between 98.20–98.40, capped by the 50-EMA at 98.60 and the 100-EMA near 99.05, with channel resistance at 99.20–99.30 and support layered at 98.10 and 97.85.
When the two macro paths are compared, the bias in GBP/USD becomes clearer. The BoE is easing cautiously despite inflation remaining above target and internal resistance to cuts, while the Fed is edging toward future easing with inflation already close to target. This relative positioning favors GBP, particularly as the DXY struggles below the 99.20–99.30 zone. Technically, GBP/USD sits at the intersection of a medium-term descending trendline from late June and a newly formed short-term bullish channel. That long-term trendline converges near 1.3449–1.3455, an area recently tested, while the short-term structure shows higher lows with support around 1.3335–1.3355. Rising 50- and 100-EMAs on the 2-hour chart, along with daily support from the 100- and 200-day SMAs near 1.3361 and 1.3347, reinforce the bullish near-term structure. A daily close below 1.3400 would open a retest of that SMA cluster, while a decisive break beneath it would mark the first meaningful deterioration of the bullish case.