- The GBP/USD forecast is neutral after a seesaw move under 1.3300.
- The US-China trade talks remain a pivot for the market participants.
- The upgraded UK GDP forecast provides support to the pound.
The GBP/USD forecast remains neutral above mid-1.3200 during the London session on Friday, paring intraday losses. The greenback eased following a sharp rally in the Asian session.
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The Dollar Index (DXY) surged to 100.75 on Thursday due to optimism driven by trade developments. The initial spike in the US dollar followed the announcement of the US-UK trade deal. It was the first deal under Trump since Liberation Day. Though the deal had symbolic significance, its economic implications are limited as the US is already in surplus with the UK trade.
Markets now pay attention to the US-China trade talks scheduled on May 10 in Switzerland. US Treasury Secretary Scott Bessent and Trade Representative Greer will meet their Chinese counterparts to ease trade tension. The US Commerce Secretary also expressed hopes to de-escalate tariff tension.
The British pound found support despite initial weakness from domestic factors. The Bank of England cut rates by 25 bps to 4.25% with a 7-2 vote split. Two members favored no change, while two other members advocated for a 50-bps cut.
The UK GDP forecast was also revised from 0.75% to 1.0% by the BoE. The central bank also maintained a cautious approach for future rate cuts. These factors aided the pound in pausing its downside against most of its peer currencies.
On the other hand, the Fed opted to keep rates unchanged at 4.25%–4.50% for the third consecutive meeting. Chair Powell warned of inflationary risks due to tariff measures. He also noted that sustained trade barriers could lead to stagflation.
Looking forward, the GBP/USD traders will be watching developments around US-China trade talks over the weekend and follow-up commentaries from the central banks. Any signs of de-escalation can further shift momentum in the pair.
GBP/USD technical forecast: Neutral after recovery
The 4-hour chart shows a mixed scenario. The price broke the previous low and the support at 1.3225 but managed to regain above the level. It shows a slight weakness prevailing in the pair. The RSI also rose from the oversold area but remains in the sell zone.
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The 30-period SMA stays above the price, which also indicates a bearish pressure. However, the SMA can attract a meaningful pullback.
The immediate hurdle lies at 1.3300, ahead of 1.3330. On the downside, 1.3225 and 1.3200 are potential support levels.
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