GBP/USD tumbled to a fresh 4-week low of 1.2505 following the Bank of England’s decision to hold rates steady in a 6-3 vote, reinforcing a dovish policy outlook. Despite Governor Bailey’s assurances of a gradual path to rate cuts, the market focused on the narrowing rate differential between the U.S. and UK, especially after the Fed’s hawkish guidance earlier this week. The pound, which had been the best-performing G7 currency against the dollar this year, has reversed course, losing 1.2% in December and now down 1.06% year-to-date as UK growth falters and rate expectations diminish.

Technically, GBP/USD remains under bearish pressure. Key support levels include Thursday’s low at 1.2505, followed by the November 22 trend low at 1.2475 and the May 10 weekly low at 1.2446. A sustained break below these levels could open the door for a test of the 1.2400 region. Resistance sits at 1.2563, the post-Fed low, with further barriers at 1.2628, the session high. The pair’s repeated failure to recover above key moving averages reflects a broader downtrend as market sentiment shifts against sterling.

Sterling’s outlook depends on evolving central bank policy and economic data. With the BoE signaling dovish intent and the Fed maintaining a hawkish bias, GBP/USD could remain under pressure in the near term. Traders will closely watch Friday’s U.S. core PCE inflation data for additional cues on the dollar’s strength. Meanwhile, sterling’s performance in crosses like GBP/JPY and GBP/AUD may offer more attractive opportunities, as relative rate dynamics evolve and UK policy expectations shift into 2025.