The GBP/USD pair remains steady above the 1.2960 mark, showing resilience near a multi-month peak reached on Thursday. However, the pair struggles to gain significant momentum due to mixed fundamental signals. The US Dollar (USD) sees a modest uptick, limiting the upside, while the policy divergence between the Federal Reserve (Fed) and the Bank of England (BoE) provides underlying support for the British Pound (GBP).
On Wednesday, the Fed maintained its projection for two 25 basis points rate cuts in 2025. Additionally, the central bank raised its inflation forecast, signaling caution. Meanwhile, uncertainty surrounding US trade policies and escalating geopolitical tensions continue to support the USD. These factors create a challenging environment for GBP/USD to gain significant traction.
Despite a slight recovery from a multi-month low earlier this week, the USD’s strength remains limited. Concerns over a potential slowdown in US economic activity due to trade tariffs might push the Fed to cut rates sooner than expected. Currently, markets are pricing in the likelihood of rate cuts in June, July, and October.
In contrast to the Fed, the BoE has taken a more cautious approach. The UK central bank warns against premature expectations of rate cuts and has increased its inflation forecast for 2024. This suggests that borrowing costs in the UK may remain higher for longer compared to the US. As a result, the policy divergence between the two central banks provides ongoing support for the GBP/USD pair.
With no major economic data releases from the UK or the US on Friday, market sentiment remains driven by broader macroeconomic trends. Given the current fundamental backdrop, GBP/USD’s path of least resistance appears to be on the upside. Any short-term dips could be seen as buying opportunities, keeping the pair on track for a third consecutive week of gains.
GBP/USD remains above 1.2900, staying close to its highest levels in months. The Fed’s policy stance and geopolitical concerns strengthen the USD, while the BoE’s cautious approach to rate cuts supports the GBP. Traders should monitor upcoming economic developments and central bank statements for further market direction.
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GBP/USD remains above 1.2960 as Fed and BoE policies diverge. The Fed hints at rate cuts, while the BoE signals caution. Read more
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