- Recently, equity markets have once again helped to support the British pound against other major currencies.
- According to stock market trading, the UK’s FTSE 100 index has already risen for the past nine trading sessions, coinciding with easing trade war tensions, marking its longest winning streak since December 2019.
- The crucial question for Forex currency investors is whether upcoming UK data, global developments next week, and the Bank of England’s monetary policy meeting results on May 8th could trigger a reversal in recent market trends.
- The GBP/USD price is stabilizing around the resistance level of 1.3320 at the time of writing this analysis.
Expected Bank of England Policies
If the Bank of England remains cautious about interest rate cuts and risk appetite declines, the British pound could benefit. Recently, UK economic data results were mixed on Friday, with stronger-than-expected retail sales data offset by a further decline in consumer confidence. According to the economic calendar data results, retail sales volumes rose by 0.4% for March, compared to the consensus forecast of a 0.3% decline, although the February increase was revised down to 0.7% from the original reading of 1.0%. favourable weather boosted demand for clothing and outdoor product sales, which was partly offset by a fall in supermarket sales.
First-quarter sales rose by 1.6% compared to the final quarter of 2024, the strongest increase since July 2021. According to Forex market trading, the British pound is taking some comfort from this. We wouldn’t overstate it, but it has performed well and was threatening to roll over, and it has received some support from the data, temporarily at least. On another front, doubts remain about the sustainability of spending. The UK GfK consumer confidence index fell to -23 for April from -19 previously, slightly worse than the -21 forecast, its lowest level since November 2023, with all components declining during the month.
Trading Tips:
The British pound continues to benefit significantly against other major currencies from Britain’s avoidance of US tariffs.
Will the GBP/USD Price Rise? And Where To?
According to trusted trading platforms, the GBP/USD exchange rate rose to test a three-year high of around 1.3430 before retreating slightly. With the recent decline, some currency market experts have lowered their foreign exchange market forecasts, as the dominant theme in the markets has been the increasing political turmoil in the United States, caused by escalating trade tensions, which has led to increased fears of a US recession. In the longer term, structural challenges, such as US political shifts, the trade war, and capital flight from US assets, point to a significant decline in the value of the US dollar.
Technical Analysis for the GBP/USD pair today:
According to reliable trading platforms, the GBP/USD exchange rate rose to test its highest levels in three years at around 1.3430 before a limited pullback. With the recent decline, some currency market experts lowered their foreign exchange market forecasts, as the dominant theme in the markets was increasing political turmoil in the United States, stemming from escalating trade tensions, leading to growing fears of a US recession. In the longer term, structural challenges, such as US political shifts, the trade war, and capital moving away from US assets, point to a significant decline in the value of the US dollar.
They remain cautious about the UK’s economic outlook, but the sharp decline in the dollar has led to a strong revision in the forecast for the British pound. Accordingly, the GBP/USD pair is now expected to rise to the 1.39 resistance level on a 12-month forecast, from 1.31 previously. The forecasts are driven by a high degree of uncertainty, as investors now face multiple scenarios and forecasts based on how tariff policy develops, all of which hinge on President Trump’s decisions.
Therefore, the easiest option for investors now is to reduce exposure to the US dollar and US assets in general, and reassess when developments allow more certainty about the outlook.
Regarding the British pound, the Bank of England is expected to adhere to a cautious stance; we also believe that the market is pricing in a much larger amount of monetary easing than will actually be implemented, which provides support for the pound as expectations are reassessed. Accordingly, we expect some gains for the pound against a weaker US dollar, but it may struggle to improve significantly against the euro at present.
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