GBP/USD Forecast: UK Inflation Miss Fails to Deter Sterling Rally

• The GBP/USD forecast shows a strong pound despite downbeat UK inflation figures.

• Consumer inflation in the UK increased by 2.6%, softer than the forecast of 2.7%.

• Market participants are waiting to see the state of consumer spending in the US.

The GBP/USD forecast shows strong bullish sentiment despite downbeat UK inflation figures. The pound rose to new highs on Wednesday as the dollar resumed its decline amid economic uncertainty. Meanwhile, market participants were looking forward to the US retail sales report for monetary policy clues. 

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Data on Wednesday revealed that consumer inflation in the UK increased by 2.6%, softer than the forecast of 2.7%. At the same time, it declined from the previous reading of 2.8%. The poor numbers led to an increase in Bank of England rate cut expectations. The likelihood of a rate cut in May rose from 80% to 86%. 

However, economists believe inflation will rebound in April. At the same time, BoE policymakers have cautioned that it is too early to judge the impact of Trump’s tariffs on inflation. As a result, the pound barely reacted to the news. 

Meanwhile, the dollar remained fragile as the outlook for the US economy dimmed. Trump’s tariff moves have discouraged investors from holding US assets. As a result, the greenback has lost some of its safe-haven appeal. Market participants are waiting to see the state of consumer spending in the US. The sales report will shape the outlook for Fed rate cuts.

GBP/USD key events today

• US core retail sales m/m
• US retail sales m/m
• Fed Chair Powell speaks

GBP/USD technical forecast: Higher high signals a strong uptrend

On the technical side, the GBP/USD price has made a higher high, strengthening the bullish bias. It has broken past the 1.3200 resistance level and is trading well above the 30-SMA. Meanwhile, the RSI has entered deeper into the overbought region, indicating solid bullish momentum. 

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GBP/USD has sustained a solid bullish rally without any significant pullbacks to the 30-SMA. However, bulls are getting exhausted. The price is making much smaller candles and is approaching the 1.272 Fib extension level. 

This level might be a strong hurdle that will trigger a pullback. Such an outcome would allow the price to retest the recently broken 1.3200 key level. However, the bullish bias will remain as long as the price stays above the SMA.

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