GBP/USD: BoE at 3.75% and DXY Near 98.40 Keep the Pair in a Bullish Channel
Current GBP/USD price behaviour and immediate levels
GBP/USD is trading in the 1.33–1.34 zone after a sharp two-day swing driven by UK CPI, the BoE cut and softer US CPI. The pair traded around 1.3420 in Asia, dumped to 1.3310 after the UK inflation miss, then rebounded into 1.3370–1.3410 and tested the 1.3440–1.3455 band. The upper edge of the structure is now the 1.3450–1.3510 resistance zone, while buyers have repeatedly defended 1.3335–1.3355, with deeper structural risk only below 1.3290–1.3310.
UK CPI at 3.2% and why a 3.75% BoE rate did not crush GBP
The UK inflation print was unambiguously softer. Headline CPI fell to 3.2% from 3.6%, versus expectations around 3.5%. Core CPI slipped to 3.2% from 3.4%. Food inflation dropped from 4.9% to 4.2%, while services inflation eased only marginally from 4.5% to 4.4%, still more than 2 percentage points above the 2.0% target. Against that backdrop, the BoE cut Bank Rate by 25 bps from 4.00% to 3.75%, but the move passed on a razor-thin 5–4 vote. That split tells you the committee is not aligned behind a full easing cycle while services inflation runs at 4.4%. Markets are already pricing this cut plus at least two more moves in 2026, and some projections sketch three additional 25 bp cuts (for example March, June, September) taking policy down another 75 bps. With headline at 3.2% and sticky services, that glide path is not guaranteed. The narrow vote and explicit “caution” language in the minutes limit how dovish the BoE can be perceived, which is why GBP did not suffer a classic post-cut dump.
BoE communication: divided vote, high services inflation and a cautious easing signal
The messaging from the 3.75% decision is internally inconsistent on purpose. The bank recognises that the labour market has cooled and that inflation has rolled over from the roughly 3.8% peak in September to 3.2% in November, but it also concedes that services-sector inflation remains uncomfortably high. A 5–4 vote in favour of cutting rates is effectively a warning shot: almost half the committee believes easing now is premature or too aggressive with CPI still more than 1 percentage point above target and services above 4%. That combination gives the BoE flexibility to pause quickly if data re-accelerate. For GBP/USD, that nuance matters more than the headline 25-bp move. The market cannot price a clean, one-way dovish trajectory while the vote remains that tight and the bank repeatedly stresses two-sided risk around inflation.
US CPI at 2.7%, core at 2.6% and a structurally softer US dollar
On the US side, the numbers explain why the USD leg is weak. Headline CPI slowed to 2.7% YoY from 3.0%, and core CPI slipped to 2.6% from 3.0%. At the same time, the labour market is softening but not breaking: initial jobless claims printed 224k versus a 225k consensus and prior readings around 236–237k, with the 4-week average near 217–218k. That mix allows the Fed to keep policy “restrictive” without any urgency to cut, but it removes the inflation premium that previously supported the dollar. Fed-funds futures now price roughly 62 bps of easing for 2026, not a rapid pivot but clearly a drift away from tight policy. Result: the DXY sits around 98.3–98.4, grinding lower in a descending channel that has contained price since late November.
DXY structure: capped under 99.30 while 97.85–98.10 acts as the floor
Technically, the US Dollar Index is trapped in a controlled down-trend. Short-term charts show price consolidating in the 98.20–98.40 band with small-body candles and overlapping ranges — hesitation, not fresh buying. The 50-EMA near 98.60 and 100-EMA around 99.05 cap every bounce, and the upper edge of the descending channel sits around 99.20–99.30, where prior support has flipped into resistance. On the downside, buyers have defended 98.10 multiple times, with the channel base near 97.85 acting as last-ditch support. As long as DXY stays below 99.20–99.30, the USD remains a weak leg in GBP/USD, reinforcing the upside bias for the pair.
Macro relative value: why GBP still trades as the stronger leg versus USD
Set the two macro profiles side by side and the GBP/USD direction makes sense. The BoE has cut to 3.75%, but it is doing so with headline inflation at 3.2%, services at 4.4% and a split vote of 5–4. That is not a central bank signalling a deep, pre-committed easing cycle. In contrast, the Fed is looking at headline CPI of 2.7%, core at 2.6%, a labour market cooling but still functioning, and a curve that already bakes in about 62 bps of cuts in 2026. In other words, the BoE is easing into above-target inflation with internal resistance, while the Fed is drifting toward cuts from inflation already near target. On a relative basis, that supports GBP over USD, particularly while the DXY trades in the 98 handle and fails to regain 99.20–99.30.
GBP/USD technical structure: rising channel versus long-term descending trendline
Technically, GBP/USD is in a tug-of-war between a medium-term downtrend and a fresh short-term bullish channel. On the multi-month horizon, the pair has respected a descending trendline since late June, and that line now converges in the 1.3449–1.3455 region. This is why the recent test of 1.3455 matters: it is both a weekly high and a trendline touch. On the shorter 2-hour view, price trades comfortably inside a rising channel, with the floor lining up around 1.3335–1.3355. The 50-EMA near 1.3360 and the 100-EMA around 1.3310 both slope higher, confirming that the immediate structure is bullish. On the daily chart, the 100-day SMA at 1.3361 and 200-day SMA at 1.3347 form a critical support band. A daily close below 1.3400 opens a retest of that SMA cluster; a clean break under both would mark the first real deterioration in the bullish case.
Momentum indicators: RSI and ADX both reinforce the constructive bias
Momentum confirms the price story rather than contradicting it. The daily RSI has moved above 50, signalling that buying pressure dominates the last 14 sessions without yet entering overbought territory near 70. That leaves room for further appreciation if the pair breaks 1.3450–1.3510. The ADX trades above 20 with an upward slope, indicating that trend strength is building instead of fading. On intraday frames, the RSI hovering around neutral while price holds the channel floor signals consolidation, not a reversal. As long as RSI does not print sustained bearish divergence against new highs, the path of least resistance remains higher.
Key GBP/USD levels to monitor on both sides of the market
The market has now drawn a very clear map for GBP/USD. On the topside, immediate resistance sits around 1.3405, followed by the confluence band at 1.3449–1.3455, where the long-term descending trendline and prior weekly high meet. A sustained break above that area exposes 1.3510 as the next logical upside target. On the downside, the intraday demand zone is 1.3335–1.3355, roughly aligning with the rising channel floor and the 50-EMA. Beneath that, the 1.33014–1.3310 area and the 100-EMA form a neutrality pocket; losing it would push price back into a more balanced, indecisive regime. The critical line is 1.3290: a daily close below that level would “damage” the bullish narrative and reopen the path towards 1.31733, the deeper support where the broader downtrend can re-assert.
Event risk: UK retail sales, US PCE and the next impulses for GBP/USD
Near term, two data sets will decide whether GBP/USD can hold or extend above 1.34–1.3450. On the UK side, November retail sales are expected to accelerate from 0.2% to around 0.9% YoY. A print significantly below that would revive growth concerns and embolden the dovish camp inside the BoE, undermining GBP. A firm beat, especially above 0.9%, would support the argument that the economy can tolerate a slow, cautious easing path, which would be supportive for the pound. On the US side, PCE inflation is the next key confirmation point. If PCE tracks CPI lower towards 2% while sentiment stays soft, the market will keep DXY pinned under 99, favouring further strength in GBP/USD. A surprise rebound in PCE back toward 3% would push the dollar higher, likely capping the pair below 1.3450 and forcing a retest of 1.3335–1.3355.
Stance on GBP/USD: buy dips above 1.3335–1.3355, reassess on a break of 1.3290
Bringing the macro and technical picture together, the bias is still constructive. You have a BoE at 3.75% easing cautiously with CPI at 3.2% and services at 4.4%, a split 5–4 vote that limits how dovish the bank can credibly be, and a Fed watching 2.7% headline and 2.6% core CPI with the DXY stuck near 98.40 inside a down-channel. Technically, GBP/USD trades above the 1.3335–1.3355 support band, above the 100- and 200-day SMAs and inside a rising channel, with resistance defined at 1.3450–1.3510. In that configuration, the rational stance is short-term Buy-on-dips while the pair holds above 1.3335–1.3355, with upside focus on 1.3450–1.3510. A clean daily close below 1.3290 would invalidate that view and shift the pair back to a neutral or Hold posture with downside risk towards 1.31733.
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