The GBP/USD pair trades in a narrow range around 1.2960 during Friday’s Asian session, maintaining proximity to the 1.3000 psychological level reached on Thursday—the highest since early November. The pair’s movement remains largely dictated by US Dollar (USD) price action amid evolving Federal Reserve (Fed) policy expectations and global economic uncertainties.
USD Faces Headwinds Despite Modest Recovery
The US Dollar Index (DXY) attempts to extend its modest rebound from a multi-month low but struggles to gain meaningful traction. The Fed maintained its projection for two 25 basis point rate cuts in 2025, while also raising its inflation forecast, signaling caution amid economic uncertainties.
Concerns over President Donald Trump’s proposed trade tariffs and escalating geopolitical tensions have fueled demand for the safe-haven USD. However, investor worries about a tariff-induced economic slowdown in the US suggest that the Fed may need to ease policy sooner than expected, limiting the Greenback’s strength. Markets are currently pricing in the likelihood of Fed rate cuts in June, July, and October, reinforcing the cautious outlook for USD appreciation.
BoE Signals Slower Rate Cuts, Supporting GBP
In contrast to the Fed, the Bank of England (BoE) has warned against assuming imminent rate cuts and raised its peak inflation forecast for 2024. This signals that the BoE may reduce interest rates at a slower pace compared to its global counterparts, including the Fed—providing continued support for the British Pound (GBP).
Limited Downside Amid Lack of Key Economic Data
With no significant economic data releases from the UK or the US scheduled for Friday, GBP/USD movements will likely be driven by broader market sentiment and USD price trends. Given the supportive fundamental backdrop, any pullback in GBP/USD may be viewed as a buying opportunity, keeping downside risks limited.
GBP/USD Set for Third Consecutive Weekly Gain
The pair remains on track to close higher for a third straight week, highlighting sustained bullish momentum. As long as market expectations favor a more gradual BoE easing cycle compared to the Fed, GBP/USD is likely to retain an upward bias, with the 1.3000 level remaining a key psychological resistance point.
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