On Wednesday, GBP/USD held steady at 1.3436. The British pound found support amid a sell-off in the US dollar, driven by escalating trade tensions between the US and Europe concerning Greenland. The President of the United States, Donald Trump, has issued a warning regarding the potential imposition of tariffs on imports from the UK, Denmark, Norway, Finland, France, Germany, and the Netherlands, contingent upon these nations’ agreement to transfer control of Greenland to the United States. In response, investors started to withdraw from American assets, such as the dollar, and redirected their funds into European currencies and gold.
Despite the recent UK labour market data indicating weakness, characterized by unemployment rates approaching five-year highs and the most significant decline in payrolls since November 2020, there are noteworthy positive developments to consider. These factors encompass a decrease in layoffs, a stabilization in job vacancies and unemployment rates, along with a deceleration in wage growth that corresponds with the Bank of England’s inflation objectives. This context paves the way for potential additional interest rate reductions by the Bank of England. The central bank’s baseline scenario indicates a final reduction to 3.50% in April, with market expectations for an additional cut by mid-year and a 60% likelihood of a second cut by December.
On the H4 GBP/USD chart, the market is establishing a wide consolidation range near the 1.3455 level. Today, we anticipate the range will extend to 1.3395. A correction to 1.3450 appears probable, subsequently leading to a continuation of the downward trajectory towards 1.3326, with a possible decline to 1.3220. This situation is corroborated by the MACD indicator, which shows its signal line positioned above zero and trending downward. The H1 chart indicates that the market is currently consolidating near 1.3450, suggesting a possible decline towards 1.3400. If this level breaks, the downward trend may continue to 1.3326. The Stochastic oscillator supports this bearish perspective, with its signal line staying beneath the 50 level and consistently trending downward.
The growth of GBP/USD is intricately tied to the decline of the US dollar, largely influenced by geopolitical tensions and evolving market sentiment. The recent labour market data from the UK, along with anticipated rate cuts from the Bank of England, bolster the pound’s standing. In the near term, GBPUSD appears poised for a continuation of its downward correction, with critical support levels identified at 1.3395 and 1.3326.