empty
06.01.2025 09:16 AM
Pound Active in Its Debut

Political stability and the reduced impact of Donald Trump's trade tariffs are expected to enable the UK economy to perform better than its European counterparts, particularly Germany and France. This insight is based on a survey of 100 experts conducted by the Financial Times. However, challenges such as high labor costs, declining tax revenues, and the rapid depletion of fiscal stimulus from Rachel Reeves will continue to impede the UK's GDP growth compared to the US, contributing to a bearish trend for GBP/USD.

The UK's economy, which is predominantly service-oriented and has a smaller trade surplus with the US compared to the eurozone, is regarded as less vulnerable to Trump's trade tariffs than the economies of the eurozone, according to the survey respondents.

Impact of the New US President's Policies on the UK's GDP

This image is no longer relevant

However, the UK's tighter labor market compared to the US—where the outflow of cheap labor followed Brexit—fuels wage growth and inflation. Consequently, the futures market anticipates the Bank of England will cut the repo rate by only 59 basis points in 2025. This is significantly less than the 108 basis points projected for the European Central Bank and slightly more conservative than the 43 basis points forecast for the Federal Reserve. These varying rates of monetary easing suggest a continued decline in both GBP/USD and EUR/GBP.

According to the British Chambers of Commerce, 55% of over 5,000 UK companies plan to raise prices in the next three months, up from 39% in the third quarter. Accelerating inflation amid slowing economic growth creates a pronounced stagflationary environment, which, after a strong GDP start in the first half of the year, sent GBP/USD tumbling off a cliff in September 2024.

Trends in Inflation and Wages in the UK

This image is no longer relevant

The pair's decline to a seven-month low is also driven by rising gas prices in Europe due to the halt of Russian gas transit through Ukraine and colder-than-expected weather in the region. Storage levels are depleting at the fastest pace since the energy crisis of 2022, and the fact that the UK is a net importer of energy products puts additional downward pressure on the pound.

This image is no longer relevant

Due to high interest rates, the pound is currently viewed as a risk asset. The absence of a Santa Claus rally at the end of 2024 and the beginning of 2025 limits the chances for GBP/USD bulls to make a strong comeback. However, buyers are slowly recovering from the shock of the recent terrorist attacks in New Orleans and Las Vegas. Additionally, some bearish investors are taking profits ahead of the key US labor market data for December.

From a technical perspective, the daily chart for GBP/USD shows an inside bar pattern, indicating a potential pullback. Nonetheless, the downtrend remains intact. Therefore, any rebound from resistance levels at 1.246, 1.25, and 1.253 should be considered as selling opportunities.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

XAU/USD – Analysis and Forecast

Gold continues to hold its intraday gains, trading near the weekly high around the $3036 level. This is due to several factors, including uncertainty surrounding U.S. trade policy

Irina Yanina 10:44 2025-03-27 UTC+2

EUR/USD. Analysis and Forecast

Today, the EUR/USD pair is gaining some positive traction, breaking a six-day losing streak. The bullish momentum is lifting spot prices toward the 1.0785 level, marking a new daily high

Irina Yanina 09:58 2025-03-27 UTC+2

Who Had Any Doubts? Trump Remains Committed to His Economic Course (GBP/USD May Fall, #SPX May Rise)

Despite the ongoing political maneuvering, U.S. President Donald Trump remains committed to his economic strategy. This approach aims to dismantle the long-standing global economic model in which the U.S. primarily

Pati Gani 09:21 2025-03-27 UTC+2

Market picks wrong favorite

The higher the climb, the harder the fall. The S&P 500 tumbled in response to Donald Trump's announcement of 25% tariffs on automobiles. There will be no exceptions, although countries

Marek Petkovich 08:13 2025-03-27 UTC+2

What to Pay Attention to on March 27? A Breakdown of Fundamental Events for Beginners

There are very few macroeconomic events scheduled for Thursday, and even fewer are deemed important. The only report that deserves attention is the third estimate of U.S

Paolo Greco 05:42 2025-03-27 UTC+2

GBP/USD Pair Overview – March 27: The British Pound Stalls

On Wednesday, the GBP/USD currency pair openly traded in a flat range. Volatility remains low, with no trending movements even within the day. In other words, the market is simply

Paolo Greco 03:06 2025-03-27 UTC+2

EUR/USD Pair Overview – March 27: Donald Trump Steps Back

On Wednesday, the EUR/USD currency pair continued trading with minimal volatility and a slight downward bias. Trading volumes were absent, which is unsurprising—there has been very little news this week

Paolo Greco 03:06 2025-03-27 UTC+2

GBP/USD. A Rough Patch for the Pound

The UK inflation report failed to support the pound—all components of the release came in below expectations. On the one hand, this report is unlikely to influence the outcome

Irina Manzenko 23:41 2025-03-26 UTC+2

The Dollar Will Loosen Its Grip

The euro is retreating cautiously, worried about a potential trade war between the European Union and the United States, while the dollar is on track for its worst month

Marek Petkovich 23:41 2025-03-26 UTC+2

Donald Trump sows confusion again with tariff remarks

United States President Donald Trump once again stirred confusion on Tuesday by announcing plans to introduce a series of exemptions to his sweeping tariff proposal. The announcement served

Jakub Novak 11:36 2025-03-26 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.