GBP/USD Analysis: The Pound Continues to Decline After UK Inflation Data

Summary

The GBP/USD currency pair has experienced three consecutive bearish sessions, resulting in a decline of over 1%. This trend reflects a renewed selling bias, particularly following the release of UK inflation data.

UK Inflation Data

The UK’s year-over-year Consumer Price Index (CPI) for January was reported at 3.00%, aligning with market expectations but lower than December's 3.4%. This indicates a sustained deceleration in inflation, moving closer to the Bank of England's target of 2.00%.

Market Implications

The moderation in inflation raises the likelihood of a rate cut by the Bank of England in March, with market probabilities exceeding 50% for a reduction from 3.75% to 3.50%. Such a move could diminish the attractiveness of pound-denominated assets, leading to further selling pressure on GBP/USD.

Comparison with the U.S. Federal Reserve

In contrast, the U.S. Federal Reserve is expected to maintain its current interest rate of 3.75%, with a 94.1% probability of no change in March. This divergence in monetary policy could widen the interest rate differential, favoring the U.S. dollar and increasing its attractiveness relative to the pound.

Technical Outlook

Recent bearish movements are approaching a critical upward trendline established since November 2025. A break below this trendline could signal a more pronounced downward movement. Key technical levels include:

• 1.36604: Key resistance level.
• 1.35477: Near-term barrier aligned with the 50-period moving average.
• 1.34395: Major support level aligned with the 200-period moving average.