The EMA Battle GBP/USD has dropped below 1.3400, continuing a three-day downward trend. Traders are waiting for important UK Consumer Price Index (CPI) inflation data, which is expected to rise to 4.0% year-over-year. Core CPI is also anticipated to increase to 3.7%. The Bank of England faces challenges with rising inflation, limiting its options. Meanwhile, upcoming US CPI data is projected to rise to 3.1%. The Federal Reserve aims to cut interest rates further, despite different inflation issues in the UK and US. Currently, GBP/USD is in a consolidation phase around 1.3360. The pair is caught between the 50-day EMA at 1.3440 and the 200-day EMA at 1.3290, showing uncertainty among traders. The RSI close to 44 indicates slight bearish momentum, meaning it’s not yet oversold, with a small advantage for sellers. The 200-day EMA is acting as support, while the 50-day EMA is providing resistance, keeping prices within the current range. Potential Breakout Scenarios If GBP/USD moves sharply above 1.3450 or below 1.3290, it could break out of its range. Falling below the 200-day EMA could lead to further losses, while rising above the 50-day EMA might trigger gains. The value of Pound Sterling is influenced by the Bank of England’s policies, economic data, and trade balance, affecting its attractiveness globally. Recently, GBP/USD has weakened below 1.3400 as traders prepare for today’s UK inflation data. The key issue is a growing policy gap, with the Bank of England focused on fighting inflation while the US Federal Reserve is likely to keep cutting interest rates. This difference drives significant trading activity in the coming weeks. Today’s UK CPI is expected to rise to 4.0%, a challenging figure for a central bank during an economic slowdown. Recent data from the Office for National Statistics shows that the UK entered a technical recession in the third quarter of 2025, with a GDP decline of -0.2%. This situation limits the Bank of England’s ability to raise rates and caps the pound’s potential. In contrast, the US CPI being released this Friday is projected to be a more manageable 3.1%, giving the Federal Reserve more room to maneuver. Currently, the CME FedWatch Tool indicates an 85% chance of another 25-basis-point rate cut at the November 2025 meeting. This outlook continues to affect the long-term strength of the US dollar. The upcoming data releases are sure to cause increased volatility, which options traders can exploit. A straightforward strategy is to buy near-term at-the-money straddles, allowing traders to benefit from significant price movements in either direction. For those expecting further weakness in the pound, keep an eye on the 200-day moving average near 1.3290. This level provided strong support in the summer of 2024, but a drop below it could lead to a slide toward 1.3140. Buying put options with a strike price of 1.3250 can offer a defined-risk way to position for this possible decline. On the other hand, a surprisingly high UK inflation figure could prompt the Bank of England to take a more aggressive stance, causing the pound to rise. A consistent move above the 50-day moving average at 1.3440 would indicate strength. Traders who expect this outcome could consider buying call options with a strike price around 1.3500 to capitalize on potential gains. Create your live VT Markets account and start trading now.

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