Daily Price Outlook
During the early European trading session, the GBP/USD currency pair continued its upward momentum and remained well-supported above the 1.2800 mark, reaching an intraday high of 1.2864. The rise was largely driven by easing trade tensions and growing expectations that the Federal Reserve might cut interest rates soon. This positive sentiment helped the pair stay strong as market participants continued to react to the possibility of a more dovish Fed stance.
GBP/USD Rally Supported by Renewed Trade Optimism and US Negotiation Signals
However, the bullish rally in the GBP/USD pair was boosted by renewed optimism after US President Donald Trump expressed a willingness to negotiate with global trade partners. This signaled a potential easing of ongoing trade tensions. His comments came as US Customs and Border Protection announced plans to start collecting country-specific tariffs from 86 trade partners.
Despite maintaining his broader tariff plans, President Trump indicated a willingness to engage in discussions, sparking hopes for a more conciliatory approach to global trade relations.
Meanwhile, Treasury Secretary Scott Bessent noted that nearly 70 countries, including Japan, had reached out to Washington for talks, further fueling optimism about a potential resolution. This reduction in trade uncertainties has allowed the GBP to gain support, as UK firms stand to benefit from a decrease in US tariffs.
GBP/USD Boosted by US Rate Cut Expectations and Fed's Dovish Outlook
Apart from this, the ongoing expectations about US monetary policy are also contributing to the strengthening of the British Pound. Markets are now predicting a 25-basis-point rate cut from the Federal Reserve as early as May, with a larger cut expected by July.
According to the CME FedWatch Tool, traders are expecting the Fed to lower rates by more than 100 basis points by the end of the year. This outlook puts pressure on the US Dollar, which in turn helps push the GBP/USD pair higher.
At the same time, Chicago Fed President Austan Goolsbee highlighted that future monetary policy decisions will be based on economic data, fueling speculation that the Fed might adopt a more dovish approach. However, the concerns about the negative impact of tariffs on the US economy are growing, and traders believe the Fed may need to change its policy to help support economic growth.
This growing uncertainty around the Fed’s actions is putting additional pressure on the US Dollar, further supporting the rise of GBP/USD.
GBP/USD Strength Driven by UK’s Economic Resilience and Shifting Rate Cut Expectations
At the UK front, the country’s relatively low exposure to tariffs, estimated at just 10%, puts it in a better position to handle the impact of global trade tensions compared to other nations. The UK government has also pointed out that the direct effect of tariffs on GDP will be minimal, less than 0.1%. In addition, rising UK gilt yields, with the 10-year yield reaching 4.61%, reflect increasing investor confidence in the UK economy, which further strengthens the British Pound.
Meanwhile, market expectations for rate cuts by the Bank of England (BoE) are also growing. After recent tariff developments, the market now fully expects a rate cut in May, up from 50% previously, and predicts further cuts through 2025. This shift in expectations for both the US and UK central banks is setting up the GBP/USD pair for continued strength in the near future.
GBP/USD – Technical Analysis
The British pound is attempting a short-term recovery against the U.S. dollar, but gains remain capped below the $1.2835 resistance. After plunging from the $1.3150 high, GBP/USD has been testing broken support levels as resistance, with the pair currently hovering near the trendline retest zone.
Despite the bounce from $1.2711 support, price action remains fragile as the 50-SMA near $1.2923 reinforces downside pressure.
The Relative Strength Index (RSI) sits at 45.5, showing a modest uptick in momentum, though still beneath the bullish threshold of 50.
This suggests a recovery is underway but lacks strong conviction. A sustained break below $1.2835 could trigger another leg lower toward $1.2707, with a deeper slide targeting $1.2638 and $1.2559.
From a risk-reward perspective, sellers may view this as a favorable zone to reenter, given the clear rejection at trendline resistance. On the upside, only a clean break above $1.2906 would negate the bearish structure and shift momentum toward $1.2983.
Traders watching macro catalysts, including U.S. CPI data this week, should remain cautious. Until then, short setups remain technically favorable below $1.2835, targeting a retest of recent lows near $1.2707, with a stop above $1.2906 to manage risk.
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