The GBP/USD pair has found some support around the 1.2830 region, a one-month low hit during the Asian session on Monday. The pair is currently trading near the 1.2900 mark, though the recent uptick lacks strong bullish momentum, reflecting concerns about a gloomy global economic outlook.
The market sentiment remains dampened following US President Donald Trump’s announcement of sweeping reciprocal tariffs last Wednesday, raising fears of a deepening global trade war. These concerns have weighed heavily on investor sentiment, as reflected in widespread declines across global equity markets. This environment has benefitted the US Dollar (USD), reinforcing its safe-haven status and putting pressure on the GBP/USD pair.
However, USD bulls seem hesitant to make aggressive bets. Market expectations suggest that the tariff-driven slowdown in US business activity may compel the Federal Reserve (Fed) to resume its rate-cutting cycle soon. In fact, the market is pricing in the possibility of four quarter-point rate cuts by the Fed in 2025. This expectation, combined with anti-risk flows, has caused a sharp decline in US Treasury bond yields, undermining the USD.
The British Pound (GBP), on the other hand, draws support from expectations that the Bank of England (BoE) will be more cautious in lowering borrowing costs compared to other central banks, including the Fed. This outlook suggests that the GBP/USD pair might have room to appreciate. From a technical perspective, a bounce from the 200-day Simple Moving Average (SMA) support further supports the positive outlook for the GBP, signaling potential for upside movement.
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