GBP/USD price Forecast: Likely revisit four-month low near 1.3140

GBP/USD trades weakly near 1.3222 as the US Dollar outperforms.
The strength in the US Dollar is backed by rising US core inflation.
Investors await key UK economic data releases next week.

The British Pound (GBP) looks vulnerable against the US Dollar (USD) near its four-week low of 1.3222 during the European trade on Friday. The GBP/USD pair is under pressure due to continued outperformance by the US Dollar.

In the European trade, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, posts a fresh 19-month high at 103.28.

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Dollar momentum builds on hawkish Fed rhetoric amid firm US inflation

Strategists at RBC highlight that “U.S. core-inflation pressures are building, while the labour market remains historically tight,” reinforcing the backdrop for further Dollar strength. ING’s FX team adds that “the combination of hawkish Fedspeak and a US CPI beat earlier this week continues to pay dividends for the dollar.”

This week, the US Consumer Price Index (CPI) report for October showed on Tuesday that the core inflation – which excludes volatile food and energy items – grew at a faster pace of 0.3% vs. 0.2% estimates.

On the British Pound front, financial markets await the United Kingdom (UK) labor market data for three months ending September and the Consumer Price Index (CPI) data for October, which will be released next week.

Both the economic indicators will likely have a significant impact on Bank of England’s (BoE) interest rate expectations.

GBP/USD Technical Analysis

In the daily chart, GBP/USD trades at 1.3234, retaining a bearish near-term bias as spot holds below the 20-day Exponential Moving Average (EMA) at 1.3338. The pair’s inability to reclaim this short-term trend indicator suggests rallies remain capped for now, while the Relative Strength Index (14) around 40 hints at weak but stabilizing downside momentum rather than aggressive selling pressure.

On the topside, immediate resistance is located at the 20-day EMA near 1.3338, where a sustained break would be needed to ease the current bearish tone and open the way for a more constructive recovery. In the absence of clearly defined nearby support levels from the provided indicators, traders may look to recent price lows on the chart itself for interim floors, with the broader technical picture favoring a cautious stance while the pair trades beneath its short-term moving average.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Economic Indicator

Consumer Price Index ex Food & Energy (MoM)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The MoM print compares the prices of goods in the reference month to the previous month.The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

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