- Stability of the GBP/USD pair around and below the psychological support level of 1.2500 confirms the strong bearish dominance of the pair’s trend and signals a stronger downside move if the current strength of the US dollar continues.
- Eyes are cautiously on the future of Trump’s policies and to what extent the US Federal Reserve will continue to ease its monetary policy.
- Despite the recent weakening of the pound, many investment banks expect the pound to perform strongly in early 2025, but face increasing difficulties and may be more vulnerable later in the year.
US dollar remains stronger on Trump trade
According to trading on trusted trading platforms, the US dollar remains strongly supported against other major currencies amid continued optimism about Trump’s trade. Also, this coupled with reduced expectations that the US Federal Reserve will end its monetary easing amid fears that Trump’s policies will eventually increase the US inflation rate. Consequently, the continued strength of the US dollar increases bearish dominance of the GBP/USD trend in the coming days and months.
Trading Tips:
The GBP/USD pair is in a critical zone, ready for further decline or forming a base for an upward movement. Definitely, be careful and carefully monitor the factors that affect the said analysis.
Bank of England Rules
During 2024, the Bank of England cut interest rates twice due to ongoing uncertainty about inflation trends. Currently, financial markets expect the Bank of England to cut interest rates only twice in 2025, but most investment banks expect a more dovish stance. In this regard, ING Bank expects Bank of England policy to be accommodative in 2025 and expects a reduction of 150 basis points, compared to market expectations of around 55 basis points.
ING Bank is expected to expect six interest rate cuts by the Bank of England by 2025.
Economic performance and its impact on Sterling
In this regard, Goldman Sachs expressed some reservations about the economic outlook; stating: “While the pound has traded well recently on a mix of data, a further surrender of growth momentum is a key risk to our view that sterling can be a regional outperformer in Europe.” However, Goldman Sachs remains bullish on the pound, saying: “Broader global factors will be more important than any of this for sterling, in our view. In particular, sterling’s pro-cyclical characteristics and low exposure to tariff risks and trade uncertainty should support the currency over time, and it is the primary basis of our continued constructive view on sterling.”
Technical analysis for the GBP/USD pair today:
Our technical outlook for the GBP/USD pair remains bearish. Technically, stability around and below the 1.2500 support level will continue to fuel bearish dominance, setting up for stronger losses. On the daily chart, the most prominent support levels are 1.2460, 1.2380 and 1.2300, which in turn will push technical indicators towards oversold levels, such as the Relative Strength Index and the Stochastic Oscillator. Conversely, and in the same time frame, the resistance level of 1.2800 will remain the most important to break the downtrend.
GBP/USD Trading Signals:
We still prefer to sell GBP/USD from any uptrend in the current period, but risk-free and with a stop loss and profit limit to ensure the safety of the trading account from any sudden price reversals.
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