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GBP/USD Breaks Key Support as Rate Cut Expectations Mount Ahead of BoE Decision
Economic
Summary:
The British Pound is under pressure as stubborn inflation and weakening retail sales raise concerns over the UK economy’s direction.
Sell
CLOSEDGBPUSD
End Time
1.33400
Entry Price
1.30000
TP
1.36000
SL
1.32041 -0.00293 -0.22%
464
Points
Profit
1.30000
TP
1.32936
CLOSING
1.33400
Entry Price
1.36000
SL
The British Pound remained on the defensive Tuesday, weighed down by growing expectations that the Bank of England (BoE) will move toward monetary easing as early as August. Mounting evidence of economic fragility—highlighted by persistently weak consumer demand and ongoing inflationary pressures—has kept investors wary, with GBP extending its recent losing streak against major currencies for a seventh consecutive session.
The downward trajectory of the Pound is being driven by a combination of softer labor market data and the latest retail sales figures, which continue to paint a sobering picture of the UK consumer landscape. A survey released Monday by the Confederation of British Industry (CBI) revealed that retail sales declined for a tenth consecutive month in July, albeit at a slower pace than in June. The index reading of -34, though improved from -46 previously, still underscores the severity of the spending pullback among UK households. According to CBI analysts, consumer demand remains significantly constrained by elevated price pressures and a climate of economic uncertainty, with rising labor costs amplifying the strain on both businesses and consumers.
Since October 2024, retail volumes have been in steady decline, a trend that now threatens to solidify into a structural weakness if broader economic momentum continues to fade. Compounding the issue is the growing perception that the BoE has little room to maneuver. On the one hand, inflation remains uncomfortably high, with services inflation and wage growth refusing to yield to tighter monetary policy. On the other, consumer data and sentiment indicators suggest the real economy is buckling under the weight of previous rate hikes.
Investor focus has now turned decisively to the BoE’s August policy meeting. A growing chorus of traders and economists is anticipating a 25 basis point rate cut, marking what could be a critical turning point in the Bank’s approach to managing inflation versus preserving growth. The central bank, which has thus far walked a cautious path in balancing the two objectives, may be forced to act sooner than expected to prevent a deeper downturn. UK rate futures have already priced in an increased likelihood of an August cut, a shift that is weighing further on Sterling’s valuation.
Technical Analysis
Technically, the picture is no more encouraging. The GBP/USD pair has continued to lose ground, closing its most recent session with a sharp decline that saw the pair break through the important 1.3365 support level. This move confirms a continuation of the primary bearish trend that has been dominating the market in recent weeks. The pair is now trading along a descending bias line and remains comfortably below its 50-day exponential moving average, reinforcing the downside pressure. Additionally, technical indicators such as the Relative Strength Index (RSI) are showing no signs of relief, remaining in oversold territory with persistent negative momentum.
The structural breakdown is clear across multiple timeframes. Weekly, daily, and four-hour charts all point to continued bearish control. The failure to hold the 1.4300 zone, a key long-term level, has opened the door to further declines. The first technical target on the downside now lies near 1.3225, with the next major support eyed at the 1.3000 psychological level. Despite oversold readings, the market shows little sign of a meaningful rebound in the near term, suggesting sellers remain firmly in control.
TRADE RECOMMENDATION
SELL GBPUSD
ENTRY PRICE: 1.3340
STOP LOSS: 1.3600
TAKE PROFIT: 1.3000
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