The GBP/USD pair extended its bullish momentum on Tuesday, climbing above the 1.3200 mark for the first time since October 2024. This marks the sixth consecutive day of gains, driven by ongoing bearish sentiment surrounding the US Dollar (USD), suggesting that the path of least resistance for the pair remains to the upside.
Concerns over the potential economic impact of the escalating US-China trade war continue to weigh heavily on the USD. On Friday, China retaliated by raising its tariffs on US imports to 125%, following US President Donald Trump’s decision to increase duties on Chinese goods to 145%. Given that the US relies on several irreplaceable materials from China, the trade war has weakened confidence in the US economy, putting pressure on the USD and providing support for the British Pound (GBP).
Investor expectations also play a crucial role in the pair’s upward momentum. There is growing speculation that the Federal Reserve (Fed) may soon resume its rate-cutting cycle, with markets pricing in the possibility of a 90 basis point reduction in borrowing costs by the end of the year. This dovish outlook for the USD is further supported by a generally positive risk tone, boosted by Trump’s temporary tariff reprieve, which has undermined demand for the safe-haven Greenback.
In contrast, the GBP benefits from diminished expectations of an imminent interest rate cut by the Bank of England (BoE). This shift has acted as a tailwind for the GBP/USD pair, adding further upward pressure.
From a technical perspective, the pair’s sustained breakout above the 1.3100 mark further confirms the near-term bullish outlook. A move toward the next key resistance level near 1.3260 appears increasingly likely. However, traders may choose to await the release of key economic data, including the UK’s monthly jobs report and the US Empire State Manufacturing Index, as these could influence the USD and provide additional direction for the GBP/USD pair.
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