This morning, UK inflation data was released, as reported by ForexFactory:

• Consumer Price Index (CPI): actual = 2.5%, expected = 2.6%, previous = 2.6%;
• Core CPI: actual = 3.2%, expected = 3.4%, previous = 3.5%.

The foreign exchange market reacted with a surge in volatility as UK inflation showed a decline.

At the same time, a technical analysis of the GBP/USD chart offers some hope for bulls following a drop of more than 9% from the peaks of September 2024 (interestingly, on 10th September 2024, we noted that bulls were facing challenges).

When analysing today’s GBP/USD price movements, we observe that at the start of 2025, the price has approached a key support zone formed by:

• the lower boundary of the descending channel (drawn in red);
• the psychological level of 1.2000;
• the significant 2023 low around the 1.2040 level.

The long lower wicks on the 4-hour candles, including today’s (highlighted with an arrow), can be interpreted as a signal of increasing demand. This could be an early sign that the pound is gaining confidence to resist the building pressure from the dollar.

Traders’ attention today will be on the release of the US CPI report (at 16:30 GMT+3), which may further support the case for strengthening bulls.

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