- The stability of the GBP/USD pair around and below the psychological support level of 1.2500 confirms the strong dominance of bears on the pair's trend and signals a stronger downward movement if the current strength of the US dollar continues.
- Cautiously, eyes are watching the future of Trump's policies and the extent to which the US Federal Reserve will continue to ease its monetary policy.
- Despite the recent underperformance of the pound, many investment banks expect the pound to perform strongly early in 2025 but face increasing difficulties and may be more vulnerable later in the year.
The US Dollar Remains Stronger Due to Trump's Trade
According to trades on reliable trading company platforms, the US dollar is still strongly supported against other major currencies amid continued optimism about Trump's trade. Also, that coupled with a reduction in expectations that the US Federal Reserve will complete its monetary easing amid fears that Trump's policies will ultimately increase US inflation rates. Consequently, the continued strength of the US dollar increases the dominance of bears on the GBP/USD trend in the coming days and months.
Trading Tips:
The GBP/USD pair is in a critical zone, poised for further decline or a base formation for an upward move. Decisively, be cautious and closely monitor the factors affecting the analysis mentioned.
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Bank of England Policies
During 2024, the Bank of England cut interest rates twice amid ongoing uncertainty surrounding 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 the Bank of England's policy to be accommodative in 2025 and expects cuts of 150 basis points, compared to market expectations of around 55 basis points.
Expectedly, ING Bank expects six interest rate cuts by the Bank of England through 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 through a mix of data recently, further surrender in growth momentum is a key risk to our view that sterling can be a regional outperformer in Europe." However, Goldman Sachs remains optimistic about the pound, saying, "Wider global factors will be more important than any of this for sterling, in our view. Specifically, sterling's pro-cyclical characteristics and low exposure to tariff risks and trade uncertainty should support the currency over time, and this is the primary underpinning 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, the stability around and below the 1.2500 support level will continue to encourage the dominance of bears, thus preparing for stronger losses. On the daily chart, the most prominent support levels are 1.2460, 1.2380, and 1.2300, which will in turn push technical indicators towards oversold levels, such as the Relative Strength Index and the Stochastic Oscillator. Conversely, and on the same timeframe, the resistance level of 1.2800 will remain the most important for breaking the downtrend.
GBP/USD Trading Signals:
We still prefer to sell the GBP/USD from every uptrend in the current period but without risk and with stop loss and profit limit orders to ensure the safety of the trading account from any sudden price reversals.
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