GBP/USD Tops Four-Month High as US Dollar Loses Ground to Cooling Inflation, Rising Economic Concerns
The GBP/USD rate hit a four-month high of 1.2989 on March 13 amid a sustained rise as the US Dollar comes under pressure following declining US inflation and increasing economic concerns. The recent decline in US inflation, combined with hopes of possible rate cuts by the Fed, has undermined the Greenback, lifting the British Pound. In the meantime, the UK economy is not without its problems, with falling housing prices and a muted outlook from the Bank of England. In spite of these issues, hopes for UK-US trade talks and hopes for persistently higher interest rates have supported the Pound. Investors are now looking to forthcoming US economic statistics and UK GDP data to further assess the prospects of both economies. KEY LOOKOUTS • Deterioration in US inflation is expected to raise hopes that the Federal Reserve will reduce interest rates earlier than expected, which will soften the US Dollar. • The GBP/USD pair continues to push higher, trading around 1.2960 as the US Dollar comes under pressure with rising fears of recession. • The RICS Housing Price Balance dropped to 11% in February, signaling ongoing weakness in the UK housing market amid broader economic uncertainty. • Expectations of sustained high interest rates in the UK are supporting the Pound, as traders scale back earlier forecasts for aggressive easing by the BoE. The GBP/USD pair is holding steady near four-month highs, trading around 1.2960 as the US Dollar faces significant pressure. The recent dip in US inflation, with headline and core inflation slowing more than anticipated, has fueled speculation that the Federal Reserve will reduce interest rates in the near future, pressuring the Greenback. In contrast, the UK economy is struggling, led by a drop in house prices, but the British Pound is being cushioned by increased hopes that the Bank of England will keep higher interest rates in place for a longer time. With fears of a possible US recession and continued tariff uncertainty, the Pound is strengthening as investors await future economic data, such as the US Producer Price Index and UK GDP, for further market guidance. GBP/USD remains strong near four-month highs as the US Dollar weakens on cooling inflation, fueling expectations of Fed rate cuts. Meanwhile, the UK’s economic outlook faces pressure from a declining housing market, but optimism around sustained Bank of England rates supports the Pound. • The GBP/USD pair reached 1.2989 on March 13, maintaining strength amid a weaker US Dollar. • US February inflation data revealed a trend of cooling, with both headline and core inflation slowing more than anticipated, lowering the chances of additional rate hikes. • Expectations in markets are increasing that the Federal Reserve is likely to trim interest rates in the near future because of the downtrend in inflation and possible economic concerns. • The Greenback is also subjected to further headwinds as fears of a US recession persist, putting further pressure on the US Dollar. • The UK housing sector was weak, with the Residential Market Survey recording a second successive fall in the Housing Price Balance to 11% in February. • The UK 10-year gilt yield rose, indicating expectations that the Bank of England will keep higher interest rates for longer. • UK Prime Minister Keir Starmer was optimistic that the UK would not face US tariffs on steel and aluminum, which augured well for UK-US trade relations. The GBP/USD currency pair has been trending upwards, hitting a four-month high, indicating a positive sentiment for the British Pound. This change arrives as the US Dollar is increasingly under pressure, much of which stems from inflation and general economic concerns in the United States. As US inflation appeared to be easing, speculation grew that the Federal Reserve would soon decide to cut interest rates, which has further undermined the Greenback. In the meantime, the UK is working through its own economic woes, but the Pound is continuing to find favor, in part because it is expected that the Bank of England will maintain interest rates higher for longer. GBP/USD DAILY PRICE CHART CHART SOURCE: TradingView As the UK works through uncertainty in its housing market, where falling housing prices have been seen in recent months, there is cause for hope when it comes to trade with the US. UK Prime Minister Keir Starmer has shown faith that the nation would be spared tariffs on aluminum and steel via ongoing negotiations, which has allowed for a slightly more optimistic note in the market. As attention turns to pending economic data points, such as the UK GDP reports and more information regarding US inflation, prospects for both currencies remain tied to changing economic updates. TECHNICAL ANALYSIS GBP/USD has been in a strong bullish trend, closely following its four-month highs, with the pair repeatedly holding above the 1.2950 level. The recent escalation to 1.2989 indicates that the Pound is picking up pace, helped by the declining US Dollar. Important support is around 1.2900, while resistance is at 1.3000, where the pair is likely to encounter some consolidation before breaking higher. Indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicate bullish sentiment, although traders will watch closely for any pullbacks or overbought signals. As market players wait for new economic releases, these technical levels will be important in deciding the pair’s next direction. FORECAST The GBP/USD currency pair is expected to extend its bullish run, helped by a weakening US Dollar and expectation of the Federal Reserve to reduce interest rates in the immediate future. The Pound can continue to push towards the psychological 1.3000 resistance level if it holds its strength above crucial support levels, around 1.2950. The optimism in the market about the UK’s trade talks with the US and the Bank of England’s hardline on interest rates should give further support to the British currency. A move above 1.3000 would potentially lead to further advances, targeting the 1.3050 to 1.3100 region, if economic numbers out of the UK remain resilient. On the