Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3100.
- Add a stop-loss at 1.2800.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.2800.
- Add a stop-loss at 1.3100.
The GBP/USD exchange rate continued rising, reaching its highest level since November 8 last year. It was trading at 1.2921, up by almost 7% from its lowest level this year, making sterling one of the best-performing currencies this year.
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Sterling surges as US dollar index plunges
The ongoing GBP/USD surge is mostly because of the ongoing US dollar weakness, which is because of the rising hopes that the Federal Reserve will start to cut interest rates later this year. With the economy expected to shrink in the first quarter, analysts anticipate that the Fed will start cutting rates in May.
The economic weakness will likely happen because of the potential government spending cuts and the ongoing tariffs. Elon Musk’s DOGE team has continued to slash government spending and cut jobs in the past few weeks.
At the same time, Donald Trump has disrupted the business environment by implementing numerous tariffs that will reshape the American economy. He has implemented preliminary 25% tariffs on imports from countries like Canada and Mexico.
Trump has also hinted that he will implement additional reciprocal tariffs on most countries next month. These tariffs have led to uncertainty among consumers and businesses, a move that will lead to a 2% contraction of the economy.
The GBP/USD pair rose after the US published soft jobs numbers last week. These numbers showed that the jobless rate rose from 4.0% in January to 4.1% in February.
The next key catalyst for the GBP/USD pair will be the upcoming US consumer inflation data on March 19. Economists expect the data to show that the US CPI rose to 3.2% in February, while the core CPI moved to 3.4%.
GBP/USD technical analysis
The daily chart shows that the GBP/USD pair has bounced back to 1.2900 from the year-to-date low of 1.2090. It has rebounded to the 61.8% Fibonacci Retracement level. Also, the 100-day and 200-day moving averages are about to form a bullish crossover pattern.
Top oscillators like the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have pointed upwards. These numbers mean that the momentum it needs to continue rising.
Therefore, there are two potential scenarios for the pair. It may keep rising as bulls target the next key resistance point at 1.3100. The other scenario is where the pair retreats and retests the 50% retracement point at 1.2600.
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