GBP/USD Price Analysis – March 17, 2025
Daily Price Outlook
During the European trading session, the GBP/USD currency pair extended its gains on Monday, climbing to an intra-day high of 1.2971 as the US dollar lost momentum.
The dollar’s weakness was driven by market expectations that the Federal Reserve (Fed) will keep interest rates unchanged, reinforcing cautious sentiment among traders.
With both the Fed and the Bank of England (BoE) set to announce their monetary policy decisions this week, investors are closely watching for further guidance on interest rates and economic outlooks.
US Dollar Weakens Amid Fed’s Cautious Stance and Rising Inflation Concerns
On the US front, the broad-based US dollar failed to gain traction as it remained under pressure despite the CME FedWatch tool indicating that the Federal Reserve is likely to keep borrowing costs steady within the 4.25%-4.50% range.
This decision marks the second consecutive policy meeting where officials chose a "wait and see" approach due to ongoing economic uncertainties under US President Donald Trump’s leadership.
Market participants expect Trump’s policies to drive inflation higher while weighing on near-term economic growth. On the data front, the latest data from the University of Michigan’s consumer survey indicated an increase in five-year inflation expectations to 3.9%, up from February’s 3.5%. However, consumer sentiment dropped sharply to 57.9 in March, compared to forecasts of 63.1 and the previous reading of 64.7.
Therefore, the US dollar weakens as economic uncertainty and inflation concerns persist despite steady Fed rates. This supports GBP/USD, pushing it higher as traders favor the pound amid dollar softness and shifting market sentiment.
GBP Traders Await BoE Decision Amid Economic Uncertainty and Weak Data
On the other hand, the British pound is trading cautiously ahead of the BoE’s monetary policy announcement on Thursday.
The central bank is widely expected to keep interest rates unchanged while maintaining a "gradual and cautious" approach to future rate cuts.
Investors will pay close attention to BoE Governor Andrew Bailey’s press conference following the decision for insights into the economic outlook.
In the meantime, the concerns about the UK economy have intensified following weak economic data releases.
The UK’s monthly Gross Domestic Product (GDP) showed a contraction, while Industrial and Manufacturing Production figures for January saw a sharp decline.
In its February meeting, the BoE cut its GDP growth forecast to 0.75% for the year, adding to concerns about the economy’s trajectory.
GBP/USD – Technical Analysis
GBP/USD is trading at $1.29363, slightly lower by 0.02%, as it struggles to hold above the $1.29434 pivot point. The pair remains under pressure, hovering just below the 50-day EMA at $1.29411, indicating a potential bearish continuation if resistance levels fail to hold.
A breakdown below $1.29434 could accelerate selling momentum, exposing immediate support at $1.28932, with further downside potential toward $1.28611 and $1.28202.
On the upside, a recovery above $1.29830 could shift sentiment, with buyers targeting $1.30150 and $1.30457. However, the prevailing market sentiment favors a weaker pound amid ongoing economic uncertainty.
The pair remains influenced by Federal Reserve rate expectations and Bank of England (BoE) policy outlook. With traders anticipating a 75% chance of a Fed rate cut by June, according to CME’s FedWatch Tool, the U.S. dollar remains relatively firm.
Meanwhile, UK inflation data due later this week could provide further directional cues for GBP/USD. A weaker-than-expected inflation print may reinforce expectations of a BoE rate cut, weighing further on the pound.
Traders should closely monitor price action around the $1.29434 pivot level. A sustained move below this mark could trigger further declines, while a rebound above $1.29830 may shift momentum toward the upside.
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