British Pound Braces for Further Losses

The British pound remains under sustained pressure, driven by a weakening domestic economy and receding inflation concerns. Recent UK macroeconomic data indicate stagnation in the service sector and a continued decline in consumer spending.
RoboForex | 330 days ago

At the same time, slowing wage growth is giving the Bank of England greater flexibility to adopt a more dovish stance. Market expectations now point to a high likelihood of a rate cut at one of the bank’s forthcoming meetings.

Political uncertainty is also weighing on the currency. The government’s fragile parliamentary position and deepening internal divisions over tax and fiscal policy are adding to sterling’s vulnerability. This is compounded by falling business confidence and subdued investment activity, raising concerns about the UK’s economic trajectory into the fourth quarter.

Externally, the US dollar continues to gain support. Recent remarks from Federal Reserve officials suggest a commitment to maintaining current interest rate levels through year-end, bolstering the greenback’s appeal. In addition, escalating geopolitical tensions in the Middle East and ongoing volatility in commodity markets are fuelling demand for safe-haven assets, including the dollar.

Overall, the fundamental backdrop remains tilted towards further GBP/USD depreciation in the near to medium term.

Technical Analysis: GBP/USD

H4 Chart:

A consolidation range has formed around 1.3310. A downward breakout appears likely, signalling a continuation of the third declining wave towards a local target of 1.3125. This bearish outlook is supported by the MACD indicator, whose signal line lies below zero and is pointing firmly downward.

H1 Chart:

The pair has also formed a consolidation range around 1.3310, with the third wave of the broader downtrend now largely confirmed. The first leg of this wave reached 1.3252, followed by a correction to 1.3372. A further decline toward at least 1.3244 is anticipated, with an extension of the downward structure to 1.3125 also possible. The Stochastic oscillator confirms this scenario, with its signal line below 80 and trending downward towards 20.

Conclusion

Sterling continues to face significant headwinds from both domestic and external factors. With monetary and political dynamics aligned against it and technical structure favouring the downside, GBP/USD appears set for further declines in the sessions ahead.

Disclaimer:

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

RoboForex
Type: STP, ECN, Market Maker
Regulation: FSC (Belize)
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