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 is attracting some sellers for the second day in a row, despite the absence of any clear fundamental catalyst for a decline. Most likely, this is due to trading

Irina Yanina 11:50 2025-04-04 UTC+2

The Growth of the Gold Price Has Stopped. What Is the Reason? (There Is a Possibility of a Local Corrective Pullback in #SPX and Bitcoin)

The global market crash triggered by the announcement of sweeping tariffs personally introduced by the U.S. President continues into Asian trading sessions. While the decline has slowed, there is still

Pati Gani 09:09 2025-04-04 UTC+2

What to Pay Attention to on April 4? A Breakdown of Fundamental Events for Beginners

Only a few macroeconomic events are scheduled for Friday, but they may trigger a new storm. The market has not yet recovered from Wednesday evening's events when Trump imposed trade

Paolo Greco 07:29 2025-04-04 UTC+2

GBP/USD Pair Overview – April 4: Does Anyone Still Care About Nonfarm Payrolls and Unemployment?

The GBP/USD currency pair posted a 300-pip upward move from Wednesday evening through Thursday. Given the current situation, this may not end the dollar's decline. To be honest, the fall

Paolo Greco 06:07 2025-04-04 UTC+2

EUR/USD Pair Overview – 4: Trump's Tariffs Crash the Dollar Once Again

The EUR/USD currency pair gained nearly 300 pips between Wednesday and Thursday. We saw a repeat of the situation in early March when the U.S. dollar fell by 400 pips

Paolo Greco 06:06 2025-04-04 UTC+2

The Dollar Shot Itself in the Foot

Don't create a problem for someone else; you might get caught in it yourself. Donald Trump sought to leverage the United States' leading position in the global economy by announcing

Marek Petkovich 00:50 2025-04-04 UTC+2

EUR/USD. Nonfarm Payrolls and the Greenback

Can strong Nonfarm Payrolls help the dollar? This question is complicated, as the market is currently too shaken by Donald Trump's new tariffs. Traditional fundamental factors have been pushed into

Irina Manzenko 00:46 2025-04-04 UTC+2

USD/JPY – Analysis and Forecast

The Japanese yen is showing strong gains amid broad-based selling of the U.S. dollar, keeping the USD/JPY pair below the key psychological level of 147.00. Investor concerns over the potential

Irina Yanina 18:22 2025-04-03 UTC+2

Markets enter warpath

Donald Trump confidently speaks about America's return to its Golden Age. From his viewpoint, it's time for America to prosper, rather than other countries. However, why does the US president

Marek Petkovich 10:49 2025-04-03 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.