Sterling Remains Under Pressure as UK Fiscal Concerns Weigh Heavily
GBP/USD continued its slide Thursday, dropping to a fresh 14-month low of 1.2239 before recovering slightly to close down 0.51% at 1.23. The pair remains under pressure from rising UK bond yields, which hit 16-1/2-year highs amid mounting fiscal concerns. U.S. yields, bolstered by tariff-related developments under President-elect Trump, added further pressure on gilts and sterling. Although BoE Deputy Governor Sarah Breeden’s speech on inflation and monetary policy provided little relief, the combination of fiscal and monetary policy pressures continues to weigh on the pound.
Technical Analysis
Technically, GBP/USD faces significant resistance and downside risks. Resistance is clustered at 1.2326, marked by the falling 30-hour moving average, followed by 1.2363 (Thursday’s high) and the 10-day moving average at 1.2463. Support lies at 1.2263 (lower 30-day Bollinger Band), with the 14-month low at 1.2239 and the November 10, 2023 weekly low of 1.2187 offering additional protection. A break below 1.2187 could open the door for a retest of the psychological 1.20 level, while a move above resistance levels is unlikely without a significant shift in market sentiment.
Market Outlook
The outlook for GBP/USD remains bearish, as the UK faces both fiscal and monetary headwinds. Rising yields are acting as a tax on the economy, limiting the BoE’s ability to cut rates despite stagnating growth. Meanwhile, the dollar continues to benefit from U.S. economic resilience and relatively stable fiscal conditions. Without clear relief from UK funding pressures or a dovish shift from the Fed, sterling is likely to remain under pressure, with further downside expected in the near term.