- The weakness of the US dollar immediately after the official announcement of US tariffs on global economies, coupled with investors' relatively increased risk appetite, helped bulls push the GBP/USD pair towards the resistance level of 1.2900.
- This is the pair's highest in four months, and it is stabilizing around its gains at the start of today's Thursday trading.
Interest Rate Bets and Britain's Avoidance of US Tariffs Helped Bulls
According to Forex market trading and reliable trading companies' platforms, the British Pound benefited significantly from expectations that interest rates in Britain will remain higher for longer, with traders reducing their bets on interest rate cuts by the Bank of England to 52 basis points for 2025. Bank of England Deputy Governor Ramsden warned that persistent wage pressures could keep inflation high but suggested that future interest rate cuts could accelerate if needed.
Additionally, the Pound is seen as less exposed to US tariffs, especially after US President Trump suggested a potential trade deal with Britain that could avoid new tariffs. At the same time, Germany announced a significant increase in defence and infrastructure spending, while Britain has already outlined its plans to increase defence spending and cover it with cuts in development budgets.
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Trading Tips:
As we expected before, the improvement in investor and market sentiment will support further gains for the British pound, and now you should be careful not to renew the selling operations to take profits.
Trump's Tariffs Weaken the US Dollar
According to Forex market trading, the US dollar's decline after the confirmation of tariffs on Canada and Mexico perplexed traders and analysts alike. In general, the dollar's weakness reflects expectations that tariffs pose a significant obstacle to US economic growth and at the same time raise inflation. In short, it's stagflation. Commenting on recent trading, Morgan Stanley analysts say that this breakout is very important because it opens the door to broader US dollar weakness. After recent gains, the GBP/USD pair rose to recover the 50% Fibonacci retracement of the major decline that occurred from October 2024 to January 2025.
On another note, the slowdown in US economic data has become clear, prompting financial markets to bet on further US interest rate cuts by the Federal Reserve. Money markets show that investors are pricing in 75 basis points of cuts by the December meeting. That would mean three 25 basis point cuts, higher than the single cut expected in early February. This is weighing on US bond yields, which in turn is weighing on the US dollar.
Rise in British Treasury Bond Yields
According to recent trading, the yield on the 10-year British treasury bond rose 11 basis points to 4.613%, following a rise in European bond yields after Germany announced a historic fiscal shift to boost spending on defence and infrastructure. The move signals increased borrowing across Europe, weighing on UK revenues as the government also plans to increase defence spending, funded by cuts in other areas.
At the same time, expectations of a Bank of England rate cut have dimmed, with markets now pricing in just 52 basis points of cuts for 2025. BoE Deputy Governor Ramsden warned that persistent wage pressures could keep inflation high, but also suggested that future rate cuts could accelerate if economic conditions worsen.
Technical Analysis for the GBP/USD pair today:
According to the performance on the daily chart, bulls’ control over the GBP/USD pair is getting stronger and a move towards the psychological resistance of 1.3000 will be the strongest confirmation of the upward shift. At the same time, technical indicators will move towards strong overbought levels led by the movement of the RSI and MACD indicators. In contrast, and over the same time frame, the support level of 1.2630 will remain a threat to the current upward shift. Finally, we expect GBP/USD to remain on its upward trajectory until the reaction to the US jobs numbers which may affect market expectations for future US central bank policy.
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