GBP/USD Price Analysis – Sep 25, 2023

Daily Price Outlook

The GBP/USD currency pair failed to stop its bearish rally and faced further downward trend due to concerns over the UK's weak economy and rising inflation risks. It is worth noting that the Bank of England unexpectedly paused its plan to increase interest rates, hinting at possible economic slowdown. On the other hand, the US Dollar gained strength as the Federal Reserve hinted at more rate hikes. This made the Pound weaker against the Dollar. Federal Reserve Bank officials highlighted the need for more rate hikes despite a cooling inflation. This added pressure on the GBP/USD pair, making it challenging for the Pound to gain ground against the Dollar.

UK Economic Weakness and GBP/USD Decline

It is worth mentioning that the UK economy is getting weaker and the reason could be attributed to the uncertainty about interest rates and upcoming elections. However, the UK Prime Minister, Rishi Sunak, promised to lower inflation to 5.3% by the end of the year, but the Bank of England's recent decision to pause increasing interest rate suggests they might struggle to keep that promise.

Furthermore, the higher interest rates have hit the UK's economic activities, causing a decline in manufacturing and services PMI. Services PMI has dropped below the critical 50.0 mark for the second consecutive time, indicating a struggle for the service sector.

These factors are concerning for the UK's economic strength. Therefore, the GBP/USD currency pair faced a decline as uncertainty about interest rates and weak economic indicators in the UK persisted.

Strong US Dollar Impacts GBP/USD Pair

Another factor affecting the GBP/USD pair is the strong US dollar. This is mainly because the US Federal Reserve has taken a tough stance on raising interest rates to control inflation. They want to keep interest rates high for a longer time to control inflation and have even hinted at raising rates again by the end of the year. This has made investors more interested in US bonds, pushing their yields to levels not seen since 2007. Plus, with global uncertainty, the US dollar is seen as a safe choice. Consequently, these factors have exerted pressure on the GBP/USD pair, resulting in the US Dollar gaining strength against the British Pound (GBP).

GBP/USD - Technical Analysis

The GBP/USD pair exhibits an intensified bearish momentum, methodically nearing our anticipated target of 1.2200. We anticipate this downward trajectory to persist, with subsequent objectives set around the 1.2135 mark.

The EMA50 consistently underpins the projected bearish trend, which unfolds systematically within the bearish channel depicted on the chart. It's imperative to note that surpassing 1.2310 would negate this bearish outlook, prompting the pair to undergo an intraday bullish realignment.

For today, the projected trading parameters are established between a support at 1.2150 and a resistance at 1.2300.