Daily Price Outlook
During the European trading session, the GBP/USD pair faced a notable rally, holding its ground around the 1.2950 level and reaching an intra-day high of 1.2950.
However, the British Pound’s strength came primarily from a weaker US Dollar, which helped push the pair higher. However, market sentiment remained cautious ahead of the much-anticipated announcement of a reciprocal tariff plan by US President Donald Trump later in the day.
Trump’s “Liberation Day” Tariffs Raise Inflation Concerns and GBP/USD Volatility
US President Trump’s “Liberation Day” plan aims to impose tariffs on imports, potentially as high as 20%. This move has raised concerns about its impact on global trade, with fears that it could drive up import prices and worsen inflation.
The market became more cautious as traders worried about escalating trade tensions, especially if the tariffs are higher than expected.
The White House has suggested that tariffs could be adjusted if trading partners open up more to US imports, but this hasn't eased concerns. If these tariffs are applied, US inflation may rise, which could keep the Federal Reserve focused on maintaining higher interest rates.
For the GBP/USD pair, this could lead to more volatility as higher tariffs could push the US dollar up as inflationary pressures mount, making the GBP/USD more sensitive to changes in US economic policies.
UK Economy Faces Pressures from Trump's Trade Policies and Cooling Wage Growth
On the other hand, the UK economy continues to face uncertainties, with concerns exacerbated by Trump’s trade policies.
The UK Office for Business Responsibility (OBR) warned that the potential repercussions of Trump's tariffs could undermine the government's fiscal buffer and shrink the UK economy by as much as 1%.
Moreover, the delay in finalizing an economic deal between the US and the UK has added to the uncertainty, with concerns that the terms of any trade agreement could change following the tariff announcement.
Despite this, cooling wage growth in the UK adds to the pressures on the British currency. Data from Incomes Data Research (IDR) revealed that the median pay increase for the three months to February slowed to 3.5%, the lowest in three years, down from the prior release of 4%.
This decrease in wage growth has fueled expectations that the Bank of England (BoE) may take a dovish stance in the near future, potentially further weighing on the GBP.
Therefore, the BoE's dovish outlook, combined with the risk of escalating trade tensions, has contributed to the cautious trading behavior of the Pound.
Investors are uncertain about the implications of Trump's tariff policy on global economic growth, which could ultimately affect the UK's economic performance and trade relations with the US.
US ADP Employment Data Expected to Boost Dollar and Pressure GBP/USD
In addition to geopolitical concerns, Wednesday’s market session will also be focused on the release of the ADP Employment Change data for March, which is expected to show that private employers added 105,000 jobs.
This would represent an increase from the 77,000 jobs added in February, highlighting continued resilience in the US labor market.
Therefore, the ADP Employment Change data, showing an increase in job growth, could strengthen the US dollar, putting downward pressure on GBP/USD as expectations for a more hawkish Fed rise.
GBP/USD – Technical Analysis
GBP/USD is consolidating just above the $1.2909 threshold, testing trendline support while trading slightly below the 50-SMA at $1.2932.
The pair’s structure is largely range-bound, with repeated attempts to break above $1.2972 meeting firm resistance.
Today’s price action remains cautious as traders await fresh macro catalysts. The RSI stands at 48.50, signaling indecision with a slight bearish divergence against recent higher lows in price.
A break and sustained move above the entry trigger at $1.2909 could initiate a recovery toward $1.2966, which marks the top of the recent range and immediate resistance.
The bullish case is supported by a confluence of support levels, including rising trendline support from the March lows and the psychological zone near $1.2874.
However, any failure to hold the $1.2874 level would likely expose $1.2843 and potentially $1.2813, reintroducing a bearish bias in the near term.
The technical bias remains neutral-to-bullish above $1.2909. A breakout above $1.2932 could lift the pair toward $1.2966, while a drop below $1.2874 would negate the setup.
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