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GBP/USD: Pound Sterling remains under pressure as the Fed’s hopes for an early rate cut wane

The Pound Sterling (GBP) continues to face the wrath of dismal market sentiment in the European session on Monday. The GBP/USD pair dropped sharply as resilient United States Nonfarm Payrolls (NFP) data on Friday have dented expectations of a rate cut from the Federal Reserve (Fed) at March’s monetary policy meeting. The solid US job creation data came together with an unexpectedly robust wage growth, signaling that inflation pressures persist.

Meanwhile, the scenario for Bank of England (BoE) policymakers is becoming extremely complicated due to deepening fears of a technical recession in the United Kingdom economy. The UK Office for National Statistics (ONS) reported in its revised Q3 Gross Domestic Product (GDP) estimates that the economy contracted by 0.1%. The UK economy is expected to remain on the back foot as higher interest rates have deepened the cost-of-living crisis, forcing businesses to operate with lower capacity. The Pound Sterling falls below the crucial support of 1.2600 as the market sentiment is bearish. The short-term outlook of the GBP/USD is to the downside as the pair has dropped below the 20-day and 50-day Exponential Moving Averages (EMAs), which are around 1.2687 and 1.2642, respectively. The Cable hovers near the horizontal support of the Descending Triangle chart pattern, which is plotted from December 21’s low point at 1.2612, while the downward-sloping trendline is placed from December 28’s high point at 1.2827. The 14-period Relative Strength Index (RSI) declines towards 40.00, which could support the current downside momentum.