Why Is GBP/USD Sliding Below 1.2500? | Key Factors Behind Sterling's Decline Ahead of BoE Decision

The The ,000 xrp in 5 yearsGBP/USD currency pair has extended its decline for the third consecutive trading session, with the exchange rate hovering around 1.2490 during Thursday's Asian trading hours. This downward movement comes as financial markets position themselves ahead of the Bank of England's (BoE) highly anticipated interest rate announcement later in the day.

Market participants widely expect the British central bank to maintain its benchmark interest rate at 5.25%, marking another hold in the current tightening cycle. However, the more significant development appears to be the shifting timeline for potential rate cuts, which analysts now project won't occur until at least September. This revised outlook stems from persistent concerns about robust wage growth throughout the United Kingdom, which continues to exert upward pressure on core inflation measures - the BoE's preferred gauge of price stability.

Recent inflation data revealed the annual rate dropped to 3.2% in March from February's 3.4%, slightly exceeding market forecasts of 3.1%. While this represents the lowest inflation reading since September 2021, the figures remain sufficiently elevated to justify the central bank's cautious approach toward monetary easing.

Meanwhile, the US dollar continues to gather strength across currency markets as traders adjust their expectations regarding Federal Reserve policy. Growing consensus suggests the Fed will maintain elevated interest rates for an extended duration, with higher Treasury yields further bolstering the greenback's appeal. This dynamic creates additional headwinds for the GBP/USD pair.

Recent commentary from Federal Reserve officials has reinforced this outlook. Boston Fed President Susan Collins emphasized the necessity for sustained economic moderation to achieve the central bank's 2% inflation target, while Minneapolis Fed President Neel Kashkari indicated rates would likely remain unchanged for the foreseeable future.

Technical indicators show the GBP/USD pair trading below its 50-day and 100-day simple moving averages (1.2604 and 1.2640 respectively), though it remains above the 20-day SMA at 1.2482. Key support levels to watch include the recent daily low of 1.2468, with resistance potentially emerging near the previous daily high of 1.2516.

As the trading day progresses, market participants will closely monitor the BoE's policy statement for any hints about the timing of future rate adjustments, while continuing to assess the broader macroeconomic landscape that continues to favor the US dollar against most major currencies.