GBP/USD Rises Amid Weak US Dollar and BoE Policy Speculation

GBP/USD Rises Amid Weak US Dollar and BoE Policy Speculation | Errante

25/02/2025

Market Overview

The GBP/USD price ticked lower on Tuesday towards the 1.2600 area. However, the opening hour of the London session brought renewed buying pressure, pushing it off the lows. The US dollar struggles to gain after slipping below the 107.0 level towards 10-week lows.

Fundamental Analysis

The greenback’s rebound on Monday was attributed to renewed fears of a global trade war after President Trump reiterated to proceed with the tariffs on Canada and Mexico as planned. Trump’s confirmation of the schedule has added another layer of uncertainty to global trade.
Looking ahead, the traders will keep their primary focus on US GDP and US Core PCE Index data, which is set to be released this week. Significantly, the Core PCE report is expected to guide the Fed’s monetary policy.
The Fed has maintained the policy rates at 4.25 – 4.50 %, emphasizing the need to find more clarity on Trump’s trade tariffs before making any adjustments. Chicago Fed President Goolsbee said on Monday that policymakers need clarity on inflation trends to cut rates further.
Meanwhile, the Bank of England’s outlook remains uncertain. The central bank recently cut 25 bps rates to 4.5%, signaling a gradual easing stance. However, MPC member Swati Dhingra called for aggressive rate cuts, citing weaker consumer demand. Dhingra had previously voted for a 50 bps rate cut and had warned that a gradual approach could leave the policy in a restrictive zone at the year’s end. Market participants anticipate two rate cuts by 2025, and the subsequent adjustment will likely appear in March.
The GBP/USD’s near-term direction mainly depends on the Fed’s monetary policy expectations and UK economic data. In case of US inflation surprise to the upside, the pair could tumble to the lows.

Technical Analysis

The GBP/USD remains neutral, with no apparent bias. A 30 pip range.The price remains supported by the 1.2600 mark. However, the upside remains capped at 1.2645, a pivot point for today. Sustaining below the 20-period SMA on the 4-hour chart could gather selling traction.

Conclusion

GBP/USD’s movement is driven by global trade tensions, the weak US Dollar, and uncertain policies from the Federal Reserve and Bank of England. Upcoming US GDP and Core PCE data will be key to determining its direction. Technical support at 1.2600 is holding, while resistance at 1.2645 limits further gains.