- The GBP/USD currency pair’s recent attempts to recover have not moved far from the vicinity of the 1.2500 support level, which we have often mentioned as the most important to maintain bearish dominance over the GBP/USD trend.
- Technically, a break of this support would send the pair to a seven-month low.
- According to the forex market, the GBP is down 1.5% in 2024 so far, after maintaining its position against the US dollar for most of 2024.
GBP/USD Forecast 2025
On a related note, Scotiabank expects a strong US economy and high yields to push the US dollar to its highest level in two years, while EUR/USD slips to parity. In this environment, GBP/USD is expected to fall to the 1.22 support by the end of 2025. Scotiabank also expects the Trump administration to deliver tax cuts and regulatory rollbacks that will support the US economy. The bank also sees the potential for another positive wealth effect from strength in US stocks, which would also help support consumer spending and investment.
In this context, the bank revised its GDP growth forecast for 2025 to 2.1% from 1.8%. Along with inflation concerns, he also expects a significant impact on US Federal Reserve policy. The Fed is now expected to be able to cut US interest rates only twice in 2025 to 4.00%, keeping rates higher than the Eurozone. Furthermore, Scotiabank expects the strength of equities and high yields to continue to support the US dollar throughout the year. However, a reversal is expected in 2026 as the US economy slows and the GBP/USD pair will recover to 1.30 by the end of 2026.
Trading Tips:
The GBP/USD pair may remain in a narrow range with a downward bias until the market’s vision of the future of Trump’s policies becomes clear
Bank of England policy affects the pound
One of the factors that pressured the GBP’s performance was the slow pace of the Bank of England’s interest rate cuts through 2024, which reduced borrowing costs by just half a percentage point. This supported much of the GBP’s strength. However, changing expectations for further UK interest rate cuts in the future have put pressure on the GBP in recent weeks. Overall, markets expect a 51.5 basis point rate cut in 2025 by the Bank of England, compared to the 46 basis point cuts priced in before the last monetary policy meeting of the year, when it kept interest rates unchanged. but was more divided on the decision than markets expected.
Technical analysis for the GBP/USD pair today:
According to the performance on the daily chart above, the overall trend of GBP/USD remains bearish. Meanwhile, the support level at 1.2500 continues to solidify bearish dominance and thus readiness for a stronger downward move that could take the pair towards the next important support levels of 1.2445, 1.2380 and 1.2300. technically, this could in turn move the technical indicators towards oversold levels, led by the relative strength index and the stochastic oscillator. Furthermore, we still prefer to sell GBP/USD from each upside level without taking the risk and activating the take-profit and stop-loss levels to ensure the safety of the investment account against any sudden price reversals.
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