The GBP/USD exchange rate edged higher this week as markets responded positively to a de-escalation of trade tensions. The currency pair climbed to a high of 1.2860, gaining over 6% from its year-to-date low of 1.2105 recorded on January 13.
The bullish move is primarily driven by a combination of improving risk sentiment, the easing of US-led trade tensions, and expectations of a dovish Federal Reserve response to cooling inflation. This article features an in-depth breakdown of the topic by the experts at TelaraX.
Trade Tensions Have Eased
A significant driver of this upward move in GBP/USD was the US President‘s decision to pause tariffs on cooperating countries for a period of 90 days. The temporary halt is designed to allow his administration time to renegotiate trade arrangements aimed at reducing the country’s widening trade deficit.
The United Kingdom, one of the key beneficiaries of this policy shift, stands to gain from improved trade flows and lower export costs. Initially, the US administration proposed a blanket 10% tariff on all UK-origin goods, which would have imposed significant pressure on British exporters.
With that threat now temporarily removed, the UK economy is expected to continue its path to recovery following the slowdown seen earlier in the year.
The UK and the US enjoy a deeply entrenched trading relationship. The US accounts for 17.2% of the UK’s total trade, and the bilateral trading volume surpasses 294 billion annually. Given this strong interdependence, any imposition of tariffs would have been materially disruptive for both economies, impacting not only goods trade but also the broader investment landscape.
The easing of trade pressures has helped lift market confidence, particularly in risk-sensitive assets like the British pound. Moreover, the shift has lowered immediate concerns about global supply chain constraints, which have been a persistent theme over the past two years.
Focus Shifts to US Inflation Data
Looking ahead, the focus for traders will shift to the upcoming release of the US Consumer Price Index (CPI) data. According to a poll conducted by Investing.com, analysts expect that the headline inflation rate for March will decline to 2.6% year-over-year, down from 2.8% the previous month.
Meanwhile, core CPI, which excludes food and energy, is forecast to soften slightly from 3.1% in February to 3.0% in March. If these projections materialize, it would signal that underlying inflationary pressures are cooling, reinforcing the belief that the Federal Reserve could ease monetary policy further in 2025.
Lower inflation readings could give the Fed room to cut interest rates as early as this summer, particularly if economic growth slows and wage pressures remain contained. This would likely trigger a broad-based weakening of the US dollar, benefiting higher-yielding or undervalued currencies like the British pound.
In addition to the inflation data, traders will closely monitor commentary from leading Fed officials, including Philadelphia Fed President Patrick Harker, Chicago Fed President Austan Goolsbee, and Fed Governor Michele Bowman. Their tone–whether dovish or hawkish–could influence the interest rate outlook and thus determine the short-term direction of the USD.
GBP/USD Technical Analysis
From a technical perspective, the daily chart indicates a solid bullish structure in the GBP/USD pair. The recent move from 1.2105 to 1.2800 confirms a sustained uptrend. The pair has broken above its 50-day moving average, signaling that the short-term momentum is favoring the bulls.
Furthermore, GBP/USD has cleared a key support/resistance pivot level on the Murrey Math Lines tool, which often acts as a reliable indicator for trend reversals or continuations. It is now trading just above the lower bound of the ascending channel that has formed since early March.
Given these technical signals, the path of least resistance remains to the upside, with traders eyeing the psychological resistance level at 1.3000. This level also coincides with a Murrey pivot reverse point, reinforcing its significance.
However, traders should remain cautious. A break below the 1.2600 support zone would invalidate the bullish thesis and could prompt a deeper pullback, potentially toward the 1.2400 region, where the next strong demand zone lies.
Conclusion
The GBP/USD outlook remains bullish in the near term, supported by a favorable shift in trade policy, expectations of moderating US inflation, and the potential for a dovish Federal Reserve. The technical structure also supports further upside, with momentum indicators pointing toward a move to 1.3000, provided that price action remains above key support at 1.2600.
Traders should monitor upcoming US inflation data and Fed communications, as these events are likely to set the tone for the pair’s next major move. While short-term volatility is possible, the medium-term backdrop favors the British pound, especially if the global risk sentiment continues to improve.
With all eyes on inflation and interest rate expectations, the GBP/USD is positioned for further strength–provided key technical and fundamental thresholds hold.
COMTEX_465026222/2922/2025-04-29T04:18:28
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