GBP/USD stalled on Thursday, ending a remarkable three-day rally in which the Pound Sterling surged by 2.57% against the US Dollar. A sharp adjustment in central bank rate cut expectations has led to a narrowing interest rate differential between the UK and the US, prompting a rebalancing in currency markets.
Rate markets now anticipate fewer than 50 basis points in rate cuts from the Bank of England (BoE) in 2025, a significant reduction from previous expectations. Despite a weakening UK economy that would typically prompt a rate response, persistent inflation is limiting the BoE’s ability to act.
Meanwhile, US President Donald Trump adjusted his stance on tariffs once again, announcing a temporary suspension of tariffs for products covered by the US-Mexico-Canada Agreement (USMCA) that he negotiated during his first term. Despite the administration’s retraction on tariff threats, markets struggled to regain sufficient risk appetite to push markets higher.
GBP/USD Price Outlook
GBP/USD encountered resistance at the 1.2900 level, halting its bullish momentum and causing intraday price action to consolidate. The pair had previously surged past the 200-day Exponential Moving Average (EMA) at 1.2685, but the rally has now paused.
Technical indicators remain in overbought territory, which limits further bullish potential. However, the chart still shows an ongoing pattern of higher lows, suggesting that the pair could continue to trend higher, with the technical bottom at 1.2100 seen in mid-January still in play.
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