GBP/USD Falls to Multi-Week Lows as CPI Heat and Tariff Tensions Trigger Sterling Breakdown

GBP/USD (GBPUSD) Struggles to Hold 1.34 as Tariff Chaos, CPI Volatility, and Bailey’s Policy Tone Add Downside Pressure

Hot US CPI and Hawkish Fed Comments Send GBP/USD Back to Three-Week Lows

The GBP/USD pair is on its eighth straight session in the red, crumbling below the critical 1.3400 support as U.S. inflation data rattles rate cut bets. After the U.S. Consumer Price Index (CPI) jumped to 2.7% YoY in June, from 2.4% prior, traders rapidly dialed back expectations for aggressive Fed easing. That uptick, paired with core CPI at 2.9%—only slightly below forecast—has forced traders to reassess the September rate cut probability. GBP/USD fell as low as 1.3417, with traders reacting not only to inflation but to the Fed’s increasingly hawkish tone led by Cleveland Fed President Beth Hammack, who stressed the need to keep rates elevated amid fiscal uncertainty and persistent price risks.

Trump Tariff Blitz Adds Fuel to USD Bid, Sinks GBP/USD

Compounding the U.S. Dollar’s strength was the geopolitical escalation initiated by Donald Trump’s aggressive tariff posture. The former president unveiled a suite of new trade measures, including 30% tariffs on EU and Mexican goods starting August 1, along with potential secondary sanctions on countries continuing Russian oil imports. Markets are watching closely, but the knee-jerk reaction favored the dollar as a safe haven amid trade war fears. GBP/USD—already under pressure from inflation dynamics—slipped sharply in response, unable to withstand the dual weight of a hawkish Fed and tariff-driven geopolitical tension.

UK CPI and Labour Market Now Crucial After Bailey’s Dovish Pivot

The Bank of England’s Governor Andrew Bailey stoked further volatility in GBP/USD with remarks highlighting potential rate cuts if labor market data worsens. UK CPI due Wednesday is expected to print at 3.4%—still above the BoE’s 2% target, but unless it surprises to the upside, the central bank may continue emphasizing employment over inflation. Traders are on alert ahead of Thursday’s jobs data, as any sign of wage deceleration or rising unemployment could harden Bailey’s dovish tone. Fiscal uncertainty in the UK—linked to speculation over tax reform reversals and social spending adjustments—only adds to the downward tilt on the Pound.

GBP/USD Technical Breakdown: Descending Channel and Fibonacci Walls

From a technical view, GBP/USD’s structure has deteriorated. After failing to break 1.3500, the pair collapsed through the 50-day SMA and is now pinned near 1.3417. This level aligns with the 0% Fibonacci retracement zone and a key support zone, and while a minor bounce has emerged, further upside looks capped. The 0.236 Fibonacci barrier at 1.3456, followed by 0.382 at 1.3481 and 0.5 at 1.3501, represent short-term resistance. However, the broader structure remains bearish while the pair trades inside a descending channel. With the 50-day EMA at 1.3510 and 200-day EMA at 1.3574 still above, any bounce faces heavy supply.

Dollar Index Holds Firm Above 98 as GBP/USD Bleeds Lower

The U.S. Dollar Index (DXY) has stabilized near 98.10 after breaking a four-day rally. Despite core inflation coming in slightly below expectations, the broader USD tone remains firm. Support at 97.88 is holding, and both the 50- and 200-period EMAs sit just beneath, reinforcing upward bias. The index remains in an ascending channel, with upside targets at 98.28 and 98.43. For GBP/USD, the implication is clear—unless the DXY softens dramatically or the Fed pivots, the path of least resistance is downward.

Sterling Faces Mounting Domestic Pressure as Fiscal Doubts Emerge

The British Pound isn’t just reacting to U.S. data. Domestically, the UK faces its own swirl of political risk. Speculation is mounting around potential tax increases and public spending adjustments in the autumn budget. These fiscal headwinds, combined with an already tepid growth outlook and soft housing data, limit upside potential for Sterling. Traders are bracing for volatility in Wednesday’s CPI print and Thursday’s labor report, both of which could either cement or challenge the BoE’s dovish lean.

Verdict: GBP/USD Bias Bearish – Sell Rallies Below 1.3480 Unless Jobs/CPI Surprise

Until GBP/USD can reclaim 1.3500 and escape its descending channel, the outlook remains skewed to the downside. Strong U.S. CPI, persistent DXY strength, Trump’s tariff barrage, and a dovish BoE bias all combine to weigh on the pair. With technical resistance layered between 1.3456 and 1.3501, and fundamental pressure rising from both sides of the Atlantic, rallies are likely to be sold. The next downside test sits at 1.3395 and 1.3369, with potential to retest the June 23rd low. Unless the UK jobs and CPI data flip sentiment, GBP/USD remains a tactical sell on strength.

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