The GBP/USD pair displayed some resilience below the 1.2900 round-figure mark on Monday, attracting dip-buyers during the Asian session. Spot prices are currently trading around 1.2930, up nearly 0.10% for the day, as the pair recovers from a two-day losing streak that took it to a one-and-a-half-week low on Friday.
The US Dollar (USD) starts the week on a weaker note, stalling its three-day recovery from a multi-month low, which has provided a tailwind for the British Pound. Despite the Federal Reserve’s upward revision to its inflation projection, investors remain concerned that tariff-driven economic slowdown in the US could prompt the Fed to resume its rate-cutting cycle soon. This, coupled with a positive tone in US equity futures, is weighing on the safe-haven Greenback.
The British Pound (GBP) is finding support from the Bank of England‘s (BoE) relatively hawkish stance. The BoE recently warned against assumptions of imminent rate cuts and raised its forecast for a peak in inflation this year. This signals that the BoE is likely to reduce borrowing costs at a slower pace than other central banks, including the Fed, which provides additional support to GBP/USD. Furthermore, the recent breakout above the 200-day Simple Moving Average (SMA) — the first since November — bolsters the bullish outlook for the pair.
Looking ahead, traders are awaiting the release of flash PMIs from the UK and the US for more market direction. Speeches from influential Federal Open Market Committee (FOMC) members and comments from BoE Governor Andrew Bailey could also create short-term trading opportunities around GBP/USD. Despite some near-term volatility, spot prices remain within striking distance of the highest level since November, and the fundamental backdrop suggests further upside potential for the British Pound.
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