During Thursday's Asian session, the pound failed to continue its overnight rebound from a one-week low near 1.3310 against the dollar, fluctuating narrowly around 1.3370 and weakening slightly throughout the day.

With the Bank of England's interest rate decision and US consumer inflation data approaching, market risk appetite has declined, and traders have generally chosen to temporarily step back and wait and see. On the fundamental front, the Bank of England will announce its policy decision later on Thursday, and the market widely expects it to cut the benchmark interest rate by 25 basis points after its pause in November.

This expectation is mainly driven by the recent significant decline in UK inflation. Data released by the UK Office for National Statistics shows that the overall Consumer Price Index (CPI) rose 3.2% year-on-year in November, which is not only lower than October's 3.6%, but also significantly lower than the market expectation of 3.5%.

The core CPI, excluding food and energy prices, also slowed to 3.2% year-on-year, indicating continued easing of inflationary pressures. Meanwhile, the UK unemployment rate rose to its highest level since early 2021, further highlighting signs of an economic slowdown and providing the Bank of England with greater room for policy easing.

The aforementioned factors continued to weaken the fundamental support for the pound, becoming the core reason for the pound's lackluster rebound against the dollar. However, bearish sentiment towards the pound did not amplify significantly. On the one hand, the market hoped to glean more clues about the pace of future interest rate cuts from the Bank of England's statement and outlook guidance;

On the other hand, the US dollar itself has also been weak. Although the Federal Reserve remains cautious, the market is still pricing in two more rate cuts in 2026. Signs of a cooling US labor market and expectations that future Fed leadership may be more dovish have limited the dollar's potential for a sustained rebound.

Against this backdrop, the balance of power between bulls and bears in the pound against the dollar has temporarily shifted, with the exchange rate exhibiting more of a range-bound consolidation pattern rather than a one-sided downward trend.

From the daily chart, the GBP/USD pair has continued its weak and volatile pattern recently. After retreating from the high of 1.3480, the exchange rate has been consolidating within the 1.3310–1.3380 range, indicating a temporary stalemate between bulls and bears. The price is currently hovering around the 20-day and 50-day moving averages, with the short-term moving averages showing a slight downward slope, reflecting continued downward pressure.

The Relative Strength Index (RSI) is around 42, which is at a neutral to low level, and there is no obvious oversold signal, indicating that the bearish momentum is limited. If the exchange rate breaks below the 1.3310 support level, it may open up further downside potential.

If the price breaks through the resistance level of 1.3450–1.3480, the short-term rebound momentum may strengthen. However, the overall structure still leans towards a weak consolidation, and a signal of a trend reversal has not yet appeared.

Editor's Note:

The pound is currently trading in a typical "policy vacuum" phase against the dollar. Weak UK economic data and expectations of interest rate cuts will undoubtedly put medium-term pressure on the pound, but its downside is limited until the dollar shows clear signs of strengthening.

In the short term, the Bank of England's policy statement and its stance on the future path of interest rates may have a greater impact on the market than a simple rate cut. Before key events and risks materialize, the exchange rate is more likely to remain volatile, and a trend-driven market may only truly emerge after expectations for monetary policy diverge further between the UK and the US.