**GBP/USD Extends Steep Decline on Growing Expectations for BoE Rate Cut**
*By Action Forex Technical Analysis Team*
*(Original article reference: Action Forex – GBP/USD Extends Steep Decline on Growing Expectations for BoE Rate Cut)*
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## Overview
The British pound has faced intensified selling pressure against the US dollar, further deepening its decline as traders increasingly price in a near-term interest rate cut from the Bank of England (BoE). Economic data out of the UK continues to underwhelm, while mixed signals from Bank of England policymakers amplify the expectations that monetary policy may soon shift towards greater accommodation. This article delves into the technical and fundamental factors fueling the GBP/USD decline, explores current market sentiment surrounding BoE rate expectations, and outlines the technical outlook for the pair.
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## Fundamental Backdrop: Soft UK Data and Central Bank Dovishness
Recent macroeconomic releases have contributed significantly to the bearish momentum in GBP/USD. The following aspects have stood out:
– **Weak UK Economic Indicators:**
– Recent figures have shown below-par wage growth.
– Headline inflation has continued to moderate, coming closer to the BoE’s 2 percent target.
– Consumption growth remains tepid, while surveys indicate growing business pessimism.
– **Bank of England Signaling:**
– Several BoE officials, including Governor Andrew Bailey, have signaled that tighter monetary policy may not be necessary for much longer.
– Policymakers expressed concerns over the impact of elevated rates on households and the broader economy.
– The central bank’s language in recent statements suggests a willingness to pivot towards easing if economic conditions warrant it.
– **Market Rate Cut Expectations:**
– Money market pricing implies at least two 25-basis-point cuts from the BoE by the end of 2024.
– The probability of a rate cut as early as the summer has risen sharply in light of recent economic trends.
**In summary:** The fundamental landscape is shifting rapidly, with market participants growing more convinced that the BoE will soon act to support struggling parts of the UK economy, adding pressure to the pound.
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## US Dollar Strength: A Complicating Factor
Adding to GBP/USD’s woes is the persistent resilience of the US dollar. The factors behind this include:
– **Solid US Economic Activity:**
– The US economy has continued to register robust activity, with job market data and GDP prints regularly surpassing expectations.
– **Cautious Fed Rate Guidance:**
– The Federal Reserve has communicated a cautious approach regarding future rate cuts, urging patience and data dependency.
– This contrasts with the more dovish signaling coming from the Bank of England.
– **Safe-Haven Flows:**
– Risk-off sentiment in global markets, due to geopolitical and economic uncertainties, has continued to funnel demand into dollar-denominated assets.
**Implication:** The resulting policy divergence between the BoE and the Federal Reserve, juxtaposed with structural US dollar strength, has made it difficult for sterling to find a meaningful floor.
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## Technical Analysis: GBP/USD in Focus
The steep decline in GBP/USD has drawn the attention of technical analysts as several key levels have been breached. This technical review highlights significant support, resistance, and momentum indicators.
### Short-Term Chart Observations
– **Recent Price Action:**
– GBP/USD has broken decisively below the 1.2700 psychological level.
– Sharp sell-offs have been observed on strong volume, indicating conviction among traders.
– **Key Support Levels:**
– The immediate support now sits near 1.2500, an area that previously acted as resistance during the pair’s earlier climb.
– Below 1.2500, the next major support is cited around 1.2430 (mid-March lows).
– If these levels give way, the pair could target the 1.2300 handle.
– **Resistance
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