On Thursday, during European trading, the British pound (GBP) showed a cautious performance against the US dollar (USD), hovering around 1.3500, a low not seen in nearly a month. The GBP/USD pair is feeling the weight of diminishing UK inflation and softened job market conditions, which are contributing to the currency’s struggles.
This week, the Office for National Statistics (ONS) revealed that the ILO unemployment rate rose to 5.2% for the three months ending in December, marking the highest rate in five years. Additionally, the consumer price index (CPI) growth fell to 3% year-on-year in January, down from 3.4% in December, as anticipated.
Looking ahead, important data points like January’s UK retail sales figures and the preliminary S&P Global Purchasing Managers’ Index (PMI) for February, set to be released on Friday, are expected to influence the pound’s trajectory.
Meanwhile, the robust performance of the US dollar is another factor weighing on GBP/USD. The minutes from the Federal Open Market Committee’s (FOMC) January meeting, released Wednesday, highlighted a strong dollar, indicating that several policymakers are hesitant to lower interest rates without significant progress in bringing inflation back to the 2% target.
GBP/USD Technical Analysis
As of now, GBP/USD is trading cautiously around 1.3500, remaining below the 20-period exponential moving average (EMA) of 1.3557. Overall averages are trending downwards, with intraday rebounds appearing limited.
The 14-period Relative Strength Index (RSI) sits at 33.74, not quite in oversold territory, yet signaling some weak momentum, which may suggest additional downside potential.
After breaking out of a symmetrical triangle formation, often referred to as a volatility contraction pattern (VCP), the price trends have generally been downward, typically accompanied by wider ticks and higher volumes. If the pair dips below Tuesday’s low of 1.3500, it could extend its decline towards the low of 1.3400 from January 22.
