GBP/USD made its way to a four-month high, tapping into the psychological 1.3000 handle yesterday. A retest and foray above earlier in the day was met with some modest selling pressure keeping cable just below the key level for now.
Cable just like EUR/USD has been a significant beneficiary of US Dollar weakness over the past few weeks. A combination of softer data which has raised recession concerns and a general switch by market participants from the US Dollar to other safe haven assets have dented the greenbacks appeal.
That trend continued yesterday with US data continuing to haunt the dollar. The greenback fell against all G10 currencies excluding the yen yesterday. February retail sales rose less than expected (0.2% month-on-month versus 0.6% consensus) following a major drop in January, while the Empire Manufacturing Index plummeted to the lowest level in more than a year.
Central Bank Uncertainty to Lead to a Period of Consolidation?
Central Banks are in focus this week with both the Federal Reserve and Bank of England (BoE) meeting ahead. This could lead to a pause in the cable rally as markets adopt a wait and see approach.
The Bank of England (BoE) is likely to keep UK interest rates unchanged after cutting them by 25 basis points in February. The central bank may take a cautious approach due to uncertainty around US trade policy affecting the global economy.
This could lessen expectations for another quick rate cut, supporting GBP/USD. However, Governor Andrew Bailey and his team might still take a cautious tone, suggesting they will ease monetary policy slowly and carefully.
The softer data in the US has seen rate cut expectations increase of late which could work in favor of further gains for cable. That is if the Federal Reserve hints at more rate cuts this year.
However, given the narrative around inflation and with universal tariffs scheduled for April, I think the Fed might maintain their current policy stance at this week’s meeting.
Technical Analysis - GBP/USD
GBP/USD has been on a tear since the trendline break and retest on February 11.
Since then cable has risen some 660-odd pips to trade around the psychological 1.3000.
The trend is strong at this stage but a daily candle close above the 1.3000 handle is needed if the bulls are to remain in control.
If that does occur then immediate resistance will be found at 1.3140 and 1.3210.
A rejection of the 1.3000 handle may find support at 1.2864 and then the 200-day MA at 1.2797 comes into focus.
GBP/USD Daily Chart, March 18, 2025
Support
- 1.2864
- 1.2797
- 1.2654
Resistance
- 1.3140
- 1.3210
- 1.3250