Gbpusd To Find Support Scotiabank

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Gbpusd To Find Support Scotiabank

Gbp/Usd To Find Support At 1.2668

The GBP/USD pair has turned weak lately, but Scotiabank believes that the losses will remain limited. Even though the UK CPI was a lot weaker than expected, the bearish trend in GBP/USD has found a stronghold for now.

Given the weak sentiment of GBP/USD, the Scotiabank economists added that the pair will likely find support near 1.2668. As for a complete turnaround of the trend, Scotiabank added that the cable will need to cross the resistance zone near 1.2725 - 1.2735.

Uk Inflation Remains On A Downward Trend

The key fundamental event that is showing its effects on the GBP/USD was the UK inflation data without any doubt. In February, the UK CPI showed a change of +0.6% on an M/M basis against a 0.7% forecast. On a yearly level, inflation touched a low of 3.4%, showing consistent progress.

Just like that, the core inflation of the UK also touched a lower level of nearly 4.5% on a y/y basis. However, the services CPI was the odd one as it spiked above expectations.

Overall, the CPI report was positive for the GBP, but it appears that the traders are now looking at the potential rate cuts rather than CPI.

In the UK, the market believes that the first rate cut will have to wait till August 2024, while the US Fed will cut rates in July 2024. So, if we take that for granted, it means the US rate will go down a month earlier than the UK.

In the short term, Scotiabank added that the 1.2668 support formed on Tuesday will remain firm. An extension of the bearish trend will make the 1.2625 - 1.2635 area vulnerable.

For the GBP/USD to move into positive territory, the 1.2730 handle (resistance) remains the key. However, that resistance level continues to hold off any bullish advances for now which means there's still a lot of work to do.

Over all, even if the GBP/USD moves down to to 1.2668 - 1.2660 support zone, it could stage another attempt at the nearest resistance again.

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