GBP/USD held steady on Monday, clawing back losses after dipping to 1.2635 following upbeat U.S. ISM services data. The pair briefly tested 1.27 but failed to hold gains, weighed down by lingering concerns over UK economic weakness revealed by recent PMI and output data. Markets remain cautious ahead of this week’s UK jobs and CPI reports, as inflationary trends will likely dictate the Bank of England’s policy decision on Thursday. BoE Governor Andrew Bailey’s recent remarks about four rate cuts next year underscore the growing risk of a dovish pivot, especially if Wednesday’s CPI shows signs of easing price pressures.

Technically, GBP/USD is at risk of a bearish breakdown. The pair has slipped below its 21-day moving average at 1.2673, with the 200-day moving average turning lower—a sign of growing downside momentum. Support at the two-year ascending trendline near 1.2600 and the January 2 low at 1.2611 is critical; a clear break below these levels would open the door for a test of the November low at 1.2475. To the upside, resistance at 1.2700 remains firm, with a close above this level required to shift the near-term outlook back in favor of sterling bulls.

The pound’s path will be shaped by upcoming UK inflation data and the BoE’s decision. A weaker CPI print would likely encourage market expectations for faster BoE rate cuts, pulling GBP/USD below key support levels. At the same time, a hawkish stance from the Fed midweek could bolster the dollar, adding further pressure on the pair. For sterling bulls, holding above the 1.26 trendline is essential to avoid deeper losses, while upside momentum will need a break through 1.2700 to signal any meaningful recovery.