GBP/USD Price Analysis: Sellers Dominate as UK GDP Shrinks

• The UK economy contracted by 0.1% in October.

• US wholesale inflation increased by 0.4%, above estimates of 0.2%.

• The dollar is getting support from the wave of rate cuts in other major economies.

The GBP/USD price analysis suggests a strong bearish bias after data revealed that the UK economy unexpectedly contracted in October. Meanwhile, the US dollar remained steady despite a high chance the Fed will cut rates in December.

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Data on Friday revealed that the UK economy contracted by 0.1% in October, compared to the 0.1% economists had expected. The unexpected decline might prompt traders to increase their bets on Bank of England rate cuts next year. 

Meanwhile, the greenback remained steady despite a surge in December Fed rate cut expectations. The US CPI report, which came in line with expectations, solidified bets for a December rate cut. However, the downtrend for inflation has paused. At the same time, wholesale inflation increased by 0.4%, above estimates of 0.2%. As a result, policymakers have assumed a more cautious tone. Meanwhile, market participants are pricing fewer rate cuts in 2025. 

The dollar is also getting support from the wave of rate cuts in major economies like Canada and the Eurozone. While the outlook for the US economy is bright under Trump’s administration, the Eurozone and Canada will likely suffer. As a result, the ECB and the BoC will likely keep cutting interest rates next year at a faster pace than the Fed, giving the dollar an edge. 

GBP/USD key events today

After the GDP report, market participants do not expect any major events from the US or the UK.

GBP/USD technical price analysis: Channel breakout 

On the technical side, the GBP/USD price has collapsed and broken below the 1.2701 support level. At the same time, the price has broken out of its shallow bullish channel, indicating a reversal. It now trades well below the 30-SMA, indicating a strong bearish move. Meanwhile, the RSI is about to dip into the oversold region, showing solid bearish momentum. 

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Previously, the price was trading in a strong downtrend. However, it paused and entered a bullish channel in a corrective move. The recent impulsive break is a sign that bears have returned and are ready to resume the downtrend. Consequently, the price might soon retest the 1.2600 support level and the 0.618 key Fib retracement level.

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