The annual inflation rate in the UK was 39%, a two-year low.
Investors have fully priced in the Bank of England's expectation of a rate cut by May 2024.
Analysts expect U.S. core personal consumption spending to slow on Friday.
Ahead of the highly anticipated US GDP data, GBP/USD maintained a bearish outlook.
The annual inflation rate in the UK was 39%, a two-year low. As a result, traders took into account a possible rate cut by the Bank of England back in May.
In particular, the consumer price rate** fell, reaching its lowest level since September 2021. In addition, investors have fully priced in the Bank of England's rate cut by May 2024, and now see a nearly 50% chance of the Bank of England cutting rates by March next year.
UBS's Vassili noted that several banks have observed early pricing in rate cuts. In addition, he mentioned that the Bank of England has acted with a slight lag due to rising inflation, but is now in line with other central banks.
Meanwhile, analysts expect a similar slowdown in U.S. core personal consumption expenditures data on Friday. They believe that the annual inflation rate will slow down to 33%, the lowest level since 2021. With the US Federal Reserve (Fed) expected to cut interest rates by 150 basis points in 2024, further weakening of the US dollar is also expected.
GBPUSD is a key event for the day.
U.S. final GDP QoQ.
U.S. jobless claims.
GBPUSD Technical**: Prepare for a drop to lower lows.
Judging from the GBPUSD 4-hour chart, the pound is on the verge of breaking out of strong support and will make lower lows. This will further confirm the new bearish direction. Recently, the trend changed when ** broke below the 30-SMA, and the RSI fell to the bearish zone below 50.
The bulls weakened and failed to make higher highs. Instead, it made a lower high and could soon make a new low. In addition, if the downtrend continues, it could cause the pair to fall below 1Support level of 2601.