GBP/USD analysis: Here’s why sterling has tumbled to 2020 lows

The GBP/USD price retreated to the lowest level since November 2020 as demand for US dollars rose. The pair is trading at 1.3017, which is 8.56% below its highest level in 2020. It has been in a strong bearish trend since mid-last year.

UK economic recovery

The GBP/USD pair declined on Tuesday after the UK published strong jobs numbers. According to the Office of National Statistics (ONS), the UK unemployment rate dropped from 3.9% in January to 3.8% in February. This is a remarkable performance considering that the unemployment rate soared during the pandemic.

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Further data showed that the UK earnings excluding bonuses increased from 3.8% to 4.0%. With bonuses included, wages rose from 4.8% to 5.4%. UK companies have been forced to boost salaries in a bid to help their workers cope with the rising inflation. They have also boosted salaries in a bid to attract new talent. 

These numbers came a day after the UK published the latest GDP numbers. According to the ONS, the country’s economy grew by 0.1% on a month-on-month basis in February. This growth was slightly lower than the 0.8% that the economy experienced in January.  The manufacturing, industrial, and construction output underperformed in February.

The next important data from the UK will come out on Wednesday. The ONS will publish the latest UK inflation numbers. Analysts expect the data to show that the country’s inflation jumped from 6.2% in February to 6.7% in March. They also expect that the core CPI rose from 5.2% to 5.4%.

The GBP/USD pair will also react to the latest American inflation numbers that will come ou on Tuesday, Economists believe that the headline CPI rose by 8.4%.

GBP/USD forecast

The daily chart reveals that the GBP/USD pair has been in a strong bearish trend in the past few months. And now, the pair is hovering near an important level, which was the lowest level this year. It has continued to remain below the 25-day and 50-day moving averages and the important support level at 1.3164, which was the lowest point in December last year.

Therefore, the pair will likely maintain a bearish trend as bears target the next key support at 1.2900. This price will be 9.45% below the highest point last year.