GBP/USD Outlook Stays Negative After Soft Inflation Data

GBP/USD remains under pressure below 1.34 after UK CPI slowed to 2.8% y/y, coming in below the 3.0% forecast and down from 3.3% previously. The softer inflation data, combined with weaker UK jobs figures, has reduced expectations for a June Bank of England rate hike, with markets now leaning more toward a July move instead. Falling gilt yields and a resilient U.S. dollar are also adding pressure on the pound.

Despite the softer headline inflation reading, rising fuel costs still keep longer-term inflation concerns alive, meaning the BOE is unlikely to turn fully dovish.

Technically, GBP/USD maintains a bearish outlook after forming a double-top near 1.3650 and failing below the 200 & 50-day moving averages around 1.3430. A break below the 1.3340 to 1.3300 support zone could expose 1.3200s, while buyers need to break above the 200 & 50-day moving average to shift momentum back toward 1.3535 and 1.3600.

GBP/USD Daily Chart