The GBP/USD currency pair is experiencing a lack of strong momentum on Friday, reflecting mixed economic signals. While the US Dollar has shown a slight uptick, limiting significant gains for the pound, the contrasting outlooks from the Federal Reserve and the Bank of England provide some support for the currency pair. Currently, GBP/USD is on course to achieve modest gains for the third consecutive week.
Throughout the Asian trading session, GBP/USD has shown limited directional movement, fluctuating around the 1.2960 level. Notably, the pair remains near its highest point since early November, having recently breached the psychological 1.3000 barrier. This performance places the pair in an intricate balance, heavily influenced by USD fluctuations.
The recent Federal Reserve meeting painted a picture of cautious optimism, with a maintained forecast suggesting two rate cuts of 25 basis points planned for 2025 and an upward revision in inflation projections. Additionally, ongoing uncertainties regarding trade tariffs and rising geopolitical tensions have bolstered demand for the US Dollar, creating challenges for GBP/USD ’s upward trajectory.
The USD Index, which measures the dollar against a selection of major currencies, is trying to build on a modest recovery after hitting multi-month lows earlier in the week. However, fears surrounding a potential slowdown in the US economy due to tariff-related issues raise concerns that the Fed may need to resume rate cuts sooner than anticipated.
Market sentiment reflects an expectation that the Fed may lower borrowing costs in the upcoming months. In contrast, the Bank of England has cautioned against assumptions of imminent cuts, also raising its inflation forecasts. This divergence indicates that the UK central bank may adopt a more gradual approach to rate adjustments compared to its US counterpart, providing a degree of support for the GBP/USD pair.
No significant economic releases are scheduled for Friday from either the UK or the US. Given the prevailing economic context, the most likely trajectory for GBP/USD appears to be upward, suggesting that any downward movement could be viewed as a buying opportunity. Despite the fluctuations, the pair is likely to conclude the week on a positive note.
