This analysis highlights the current situation with GBP/USD and potential future developments:
Current Situation:
- GBP/USD is hovering around $1.26, likely ending March with a quarterly decline of 0.7% against the USD.
- This consolidation follows cautious signals from the Bank of England due to slowing inflation and economic weakness.
- The Bank of England maintained interest rates and its inflation/growth forecasts in its March meeting.
Support Levels:
- The current support level is around $1.2615.
- If the price breaks below this level, further declines towards $1.2550 and $1.2470 are possible.
- $1.2470 might trigger oversold signals on technical indicators.
Reasons for Downward Trend:
- Speculation that the Bank of England might be the first major central bank to cut interest rates due to:
- Lower-than-expected inflation (3.4% in February)
- Forecasts of inflation falling below 1% in 2025
- Potential economic contraction
Resistance:
- The current resistance level is $1.2775.
Overall, the GBP/USD is likely to weaken if inflation forecasts hold true and the Bank of England cuts rates more aggressively than anticipated.
Additional Notes:
- Today’s economic data releases could further strengthen the US Dollar if they favor the US economy.