- Poor UK macro data, increased BOE rate cut calls dent the pound.
- The US dollar index looks to extend the bounce.
- Technical set up remains bearish ahead of US CPI data.
GBP/USD consolidates in a tight range just below the 1.30 handle, having failed several attempts to extend the recovery above the last so far this Tuesday.
The upside attempts in the cable remain capped, as the US dollar recovers some ground across the board. The greenback is seen benefiting from the gains in the US Treasury yields fueled by the optimism surrounding an imminent US-China phase one trade deal signing.
Meanwhile, the latest report citing that the USTR removed the currency manipulator label for China also collaborated with the risk-on market mood.
From the GBP-side of the equation, despite the rebound from three-week lows of 1.2961, the British pound remains exposed to downside risks amid increased calls for a Bank of England (BOE) rate cut as early as this September.
Last week, the BOE Governor Carney said that there is room for 250 bps cut while over the weekend BOE policymaker Vlieghe noted that he would back for a reduction if economic data does not improve.
Further, a string of downbeat UK fundamentals, including the monthly GDP contraction and a sharp fall in the industrial and manufacturing production data, backs the case for dovish BOE monetary policy stance going forward amid looming Hard Brexit risks.
Moreover, the technical set up has also turned in favor of the bears, as GBP/USD “now looks set to test the head-and-shoulders neckline support at 1.2960 with the 5- and 10-day averages flashing a bearish crossover and the 14-day relative strength index reporting bearish conditions with a below-50 print. A close below that level would confirm a breakdown or a bearish reversal and create room for a slide to 1.2582 (Sept. 20 high)”, FXStreet’s Analyst, Omkar Godbole explains.
The focus now shifts towards the US inflation data due later in the NA session at 1330 GMT, in absence of any relevant data from UK docket this Tuesday. Also, the development surrounding the phase one trade deal will keep the markets busy.
GBP/USD Technical levels to consider
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
Gold trades near record-high, stays within a touching distance of $3,100
Gold clings to daily gains and trades near the record-high it set above $3,080 earlier in the day. Although the data from the US showed that core PCE inflation rose at a stronger pace than expected in February, it failed to boost the USD.
EUR/USD turns positive above 1.0800
The loss of momentum in the US Dollar allows some recovery in the risk-associated universe on Friday, encouraging EUR/USD to regain the 1.0800 barrier and beyond, or daily tops.
GBP/USD picks up pace and retests 1.2960
GBP/USD now capitalises on the Greenback's knee-jerk and advances to the area of daily peaks in the 1.2960-1.2970 band, helped at the same time by auspicious results from UK Retail Sales.
Donald Trump’s tariff policies set to increase market uncertainty and risk-off sentiment
US President Donald Trump’s tariff policies are expected to escalate market uncertainty and risk-off sentiment, with the Kobeissi Letter’s post on X this week cautioning that while markets may view the April 2 tariffs as the "end of uncertainty," it anticipates increased volatility.
US: Trump's 'Liberation day' – What to expect?
Trump has so far enacted tariff changes that have lifted the trade-weighted average tariff rate on all US imports by around 5.5-6.0%-points. While re-rerouting of trade will decrease the effectiveness of tariffs over time, the current level is already close to the highest since the second world war.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.