GBP/USD Slides on UK Data, Rate Cut Bets Surge

The GBP/USD pair experienced significant downward pressure this week, falling nearly 100 pips, driven by a combination of weakening UK economic data and increasingly dovish expectations for the Bank of England (BoE). January’s UK CPI cooled to 3% year-over-year, aligning with the BoE’s forecasts and reinforcing expectations of rate cuts. Crucially, the UK unemployment rate rose to a decade high of 5.2% in December, while wage growth slowed, further solidifying the likelihood of a rate cut at the March 19th meeting – currently priced in at a 71% probability. Analysts at Scotiabank and FXStreet highlight key support levels around 1.3525 and 1.3500, anticipating further declines if upcoming data (retail sales, PMI) confirms the BoE’s dovish pivot. Simultaneously, comments from the Federal Reserve’s Goolsbee suggest potential for multiple rate cuts in 2026, though services inflation remains a concern. The US Dollar strengthened amid the UK’s economic woes, exacerbating the GBP’s decline. While Norwegian inflation data prompted a reassessment of rate cut expectations there, the UK narrative remains firmly focused on easing.