Daily Price Outlook
During the European trading session, the GBP/USD currency pair has remained strong as it extended its upward momentum, trading around 1.3285.
However, the pair’s rally has been driven by a mixture of internal UK factors and broader global uncertainties, particularly the outlook for the Bank of England (BoE) and Federal Reserve’s (Fed) upcoming decisions, along with persistent trade tensions between the US and China.
GBP/USD Supported by BoE Rate Cut Expectations and Economic Factors
However, the major driver behind the pound’s strength is the growing anticipation of a rate cut by the BoE. Analysts at Bank of America (BofA) have forecasted a 25-basis-point reduction in the UK’s borrowing rates, bringing them to 4.25%.
This rate cut is expected to be backed by a majority vote of 8-1, with one MPC member, Swati Dhingra, likely pushing for a more aggressive cut of 50 basis points.
The decision comes as the UK faces potential economic risks, exacerbated by ongoing trade uncertainties and improving domestic inflation conditions.
Moreover, BofA expects the BoE to cut rates further in the coming months, reflecting a cautious stance on the UK’s economic recovery amid trade disruptions.
This dovish outlook from the BoE continues to provide support for the GBP, as investors price in a more accommodative monetary policy in the near term.
USD Faces Pressure Ahead of Fed's Decision Amid Trade and Inflation Concerns
On the US side, the US dollar is under pressure ahead of the Federal Reserve’s monetary policy announcement. Markets are almost fully pricing in a steady interest rate, keeping rates between 4.25% and 4.50%.
Moving on, the focus now shifts to the Fed's future policy guidance, especially considering the strong April Nonfarm Payrolls data, which showed better-than-expected job growth despite ongoing tariff policies.
US President Trump’s recent comments on lowering tariffs have added complexity to the Fed’s decision-making process.
While Trump has consistently urged the Fed to cut rates, arguing that the US economy shows signs of improvement, particularly with lower energy costs and strong employment figures, the Fed has maintained that interest rate cuts will only be considered if there are clear signs of economic weakness.
Moreover, concerns over rising inflationary pressures, fueled by elevated consumer price expectations and business owners hiking prices due to higher import duties, may limit the Fed’s flexibility in pursuing rate cuts.
This uncertainty surrounding US monetary policy has contributed to the USD's struggle, benefiting the GBP/USD pair.
GBP/USD – Technical Analysis
GBP/USD is navigating a tight descending channel, currently trading below the 50-SMA at $1.33314. Price attempted a recovery above $1.33082 but failed to sustain momentum, producing a rejection candle that hints at renewed bearish pressure.
The structure continues to reflect a lower-high and lower-low sequence—a classic downtrend in motion.
Candlestick analysis reveals an indecisive zone near the $1.33082 mark, with a spinning top followed by a bearish engulfing pattern, signaling hesitation and exhaustion from bulls.
Meanwhile, the Relative Strength Index (RSI) hovers around 45.54, below its average of 44.12, offering little indication of oversold relief or bullish divergence.
A break below $1.33082 reaffirms downside momentum, exposing immediate support at $1.32589 and secondary support at $1.32336.
On the flip side, if bulls breach $1.33364 with strong follow-through, the pair could challenge $1.33801.
However, the bearish channel and 50-SMA crossover overhead suggest that upside attempts are likely to face resistance.
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