GBP/USD at Month’s Lows: The Outlook Remains Weak

GBP/USD continued to consolidate at 1.3283 on Wednesday. The British pound hit a near one-month low in the previous session as investors monitored developments in the Middle East, while the dollar drew support from expectations that the Federal Reserve could raise rates today.

The suspension of US strikes on Iran contributed to a decline in oil prices and somewhat eased inflationary risks. However, US government bond yields fell only modestly, reflecting cautious market sentiment.

Attention is now turning to the Bank of England meeting on Thursday. The regulator is expected to hold rates at 3.75%, a view supported by fresh inflation data. In June, consumer price growth slowed to 2.6% on an annual basis – a 15-month low and below the Bank’s own expectations.

The rise in wholesale energy prices has not yet been fully reflected in regulated tariffs for British households. This has kept UK inflation below that of the US and the eurozone, where markets still anticipate rate hikes in September or October.

Technical Analysis

On the H4 GBP/USD chart, the market is forming a downward move towards 1.3267. A wide consolidation range around the 1.3310 level is taking shape. An upside breakout would open the way for a move towards 1.3375, while a downside breakout would suggest a move towards 1.3260, with scope for the trend to extend to 1.3190. The MACD indicator supports this scenario, with its signal line below zero and pointing firmly downwards.

On the H1 chart, the market has formed a compact consolidation range around the 1.3309 level, currently extending down to 1.3272. A move higher towards 1.3310 is expected, followed by a decline to 1.3260. The Stochastic oscillator confirms this scenario, with its signal line below 80 and pointing downwards towards 20.

Conclusion

GBP/USD has fallen to its lowest level in nearly a month as the dollar remains supported by expectations of a potential Fed rate hike. While the suspension of US strikes on Iran has helped lower oil prices and ease inflationary pressures, cautious sentiment persists as markets await the outcome of the Federal Reserve’s policy meeting later today. Attention will then shift to the Bank of England’s decision on Thursday, where rates are expected to remain unchanged at 3.75%, supported by softer UK inflation data. Technically, sterling appears poised for further downside towards 1.3260 and potentially 1.3190, with the near-term outlook heavily dependent on central bank guidance and geopolitical developments.

By RoboForex Analytical Department

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.