GBP/USD fell below 1.2300 in early NorAm trading, testing key 10-DMA support at 1.2289 after disappointing UK PMI data hinted at a deeper upcoming UK recession, raising doubts about the BoE's rate-hiking intentions and leaving cable vulnerable to potentially falling below 1.2200.

A close below 10-DMA support, which has trailed sterling for most of January, could open the way for a test of the daily cloud top at 1.2181 and then a slew of daily moving averages from the 21-DMA at 1.2166 to the 55-DMA at 1.2094.

Heading into the upcoming BoE meeting on Feb 2, traders are wary of how policymakers will pitch the UK inflation-growth conundrum. The last BoE decision was marked by three dissenters when the MPC approved a hike of 50bp.
Two of the dissenters voted to keep rates steady, while one sought a 75bp hike.

With recent UK inflation data indicating prices are rising more slowly, the doves among the BoE may gain momentum, which would likely see further GBP/USD selling, putting November 2022 lows below 1.18 in sharper focus.

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