GBP/USD breaks down as Pound bulls roll over

• GBP/USD backslid 0.55% on Thursday, slipping back below 1.2700.
• Quiet newsflows out of the UK and a limited data docket crimp Cable flows.
• Pound Sterling traders are on the backfoot heading into Friday.

GBP/USD lost its grip on Thursday, easing back below the 1.2700 handle and shedding over half of a percent in the pair’s worst showing in weeks. US Producer Price Index (PPI) inflation rose faster than expected in November, and US weekly Initial Jobless Claims also rose faster than forecasts.

US PPI inflation bucked to 0.4% in November, while October’s print was retroactively adjusted to 0.3% from 0.2% MoM. Markets were expecting a print no higher than 0.2% MoM. Core PPI inflation accelerated to 3.4% on an annualized basis, over and above the expected uptick to 3.2% from the previous 3.1% YoY. US Initial Jobless Claims for the week ended December 6 also rose to a nine-week high of 242K, further bucking investor risk appetite and missing forecasts of 220K.

Investor sentiment froze in its tracks on Thursday post-PPI inflation print, however market expectations for the Fed’s December 18 rate call have hardened around the 25 bps mark. According to the CME’s FedWatch Tool, rate traders are now pricing in over 98% odds of a quarter-point rate cut when the Federal Open Market Committee (FOMC) convenes in December 18.

Friday brings a limited data docket on either side of the Atlantic, leaving Cable traders to focus on Purchasing Managers Index (PMI) figures due early next week for both the US and UK.

GBP/USD price forecast

The GBP/USD daily chart reveals a clear transition from a prior bullish phase into a more bearish outlook, as the price has recently breached key technical levels. The 50-day Exponential Moving Average (EMA), currently at 1.2819, has been acting as dynamic resistance since mid-November, while the 200-day EMA at 1.2825 reflects a broader bearish bias. The pair's rejection at the 50-day EMA earlier this week underscores persistent selling pressure. Additionally, the downward slope of the Moving Average Convergence Divergence (MACD) histogram and a bearish crossover signal suggest that bearish momentum is intensifying.

The most recent candlestick, a large bearish candle, has decisively closed below 1.2700, signaling that the bears remain in control. This movement invalidates the recovery attempts from late November and positions the pair for further downside. Immediate support is seen near 1.2600, a psychological level, while a breach below this level could expose the August lows near 1.2550. Conversely, should buyers reclaim the 1.2700 handle, the 50-day EMA will remain the primary resistance level to watch, serving as a gauge for a potential shift in sentiment. Until then, the path of least resistance remains to the downside.

GBP/USD daily chart