The GBP/USD currency pair is currently trading around the 1.2550 level, showing signs of volatility following a turbulent trading session on Monday. The pair may continue its downward trajectory if it fails to find support at the critical 1.2500 level. Conversely, a significant resistance level appears to be set at 1.2600. After a brief spike above this level on Monday, GBP/USD reversed course, ultimately closing lower, and retreated to around 1.2500 during the Asian session before recovering slightly to 1.2550 by European trading hours.
The US Dollar faced significant selling pressure early in the week, contributing to an uptick in GBP/USD ’s performance. Market sentiment shifted as Donald Trump announced the appointment of Scott Bessent as US Treasury Secretary, which initially lessened fears regarding potential unconventional fiscal policies. However, caution returned to the market following Trump’s declaration of a 25% import tax on goods from Canada and Mexico and a 10% tariff on products from China, marking an aggressive start to his administration.
Later in the day, the Federal Reserve is expected to release the minutes from its November policy meeting, where it opted to reduce the policy rate by 25 basis points. Market participants will be keenly analyzing these minutes to gauge any hints regarding future rate cuts, particularly in December. Currently, market expectations suggest a nearly 44% chance that the Fed will keep rates unchanged at its next meeting, indicating that the US Dollar faces dual risks moving forward.
If the minutes suggest a willingness to further reduce rates, renewed downward pressure on the Dollar could provide room for a GBP/USD recovery. Conversely, any indication that policymakers prefer to await more data on labor market conditions and disinflation could lead to further declines in the currency pair.
From a technical standpoint, GBP/USD is following a descending trend, with the Relative Strength Index hovering near 40, pointing to a lack of buyer interest. The key support level to watch is at 1.2500; a breach below this could lead the pair to target 1.2400, while resistance above is noted at 1.2600, with further hurdles at 1.2630 and 1.2700.
