Daily Price Outlook
During the European trading session, the GBP/USD currency pair started the week on a positive note, trading above the 1.2630 level.
However, the Pound gained momentum mainly due to optimism surrounding a potential peace truce between Russia and Ukraine, which helped reduce the risk premium on the US Dollar.
In addition to the geopolitical news, expectations that the Bank of England (BoE) will adopt a moderate approach to policy easing have further strengthened the Pound.
The possibility of a healthy trade deal between the US and the UK also played a role in boosting confidence in the British economy. As a result, the GBP rose against most of its major peers, except the Euro, as investors remain hopeful about these positive developments.
GBP Strengthens Amid Peace Truce Hopes and BoE's Cautious Monetary Policy
On the GBP front, the Pound gained traction mainly due to hopes for a potential peace truce between Russia and Ukraine, which has lowered the risk attached to the US Dollar.
Moreover, expectations that the Bank of England (BoE) will take a moderate approach to easing its policies and a likely trade deal between the US and UK have kept the British currency in a favorable position.
On Friday, BoE Deputy Governor Dave Ramsden emphasized the need for a "careful and gradual" approach to expanding monetary policy, citing uncertainties in the labor market and global trade.
Ramsden also pointed out that inflation pressures remain high due to strong wage growth, and he no longer sees the risks of hitting the 2% inflation target as being to the downside.
Despite this, traders are already pricing in two interest rate cuts this year, which has influenced market sentiment.
Hence, the positive outlook for the Pound, fueled by optimism around the peace truce and BoE's cautious stance, has supported the GBP/USD pair, pushing it higher against the US Dollar.
GBP/USD Rebounds Amid Peace Truce Hopes, but US Dollar Faces Tariff Uncertainty
On the US front, the broad-based US Dollar lost its traction and dropped in the wake of optimism surrounding a potential peace plan between Russia and Ukraine.
As a result, the GBP/USD pair rebounded to near 1.2639 on Monday. Notably, the hopes of a peace truce contributed to easing geopolitical tensions, reducing the safe-haven appeal of the US Dollar.
It should be noted that UK Prime Minister Keir Starmer announced over the weekend that European leaders, along with Ukrainian President Volodymyr Zelenskyy, have agreed to present a peace plan to the United States.
This meeting has raised hopes for a resolution to the war. As a result of these positive developments, the demand for the US Dollar as a safe-haven asset has decreased, leading to a decline in its value.
Moving ahead, investors should remain cautious about betting too much against the US Dollar because of ongoing tariff threats. US President Donald Trump plans to impose tariffs on Canada, Mexico, and China for not doing enough to stop fentanyl from entering the US.
Although there’s some room for negotiation on the tariffs, this could create market uncertainty and may support the US Dollar in the short term.
GBP/USD – Technical Analysis
The GBP/USD pair is trading at $1.26002, down 0.01%, as the British pound struggles to hold ground against a resilient U.S. dollar. With the pair positioned just below the pivot point of $1.26228, the short-term outlook leans slightly bearish.
Immediate resistance is seen at $1.26896, followed by $1.27505 and $1.28060. A break above $1.26228 would shift sentiment bullish, with the 50-day EMA at $1.26304 acting as a key hurdle for buyers. However, sustained weakness below this level may reinforce further downside.
On the support side, $1.25586 serves as the first line of defense, with $1.25087 and $1.24528 providing deeper support zones. If the pair breaks below $1.25586, the decline could accelerate, potentially reaching the $1.25087 level, which aligns with previous consolidation areas.
From a technical perspective, the 50-day EMA at $1.26304 is acting as dynamic resistance. A sell entry below $1.26217 is favored, with a take-profit target at $1.25363 and a stop-loss at $1.26894 to cap risk.
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