- The dollar collapsed when a 25% tariff meant for Canada and Mexico failed to take off.
- The Bank of England lowered borrowing costs.
- Data on Friday showed a mixed picture of the US labor sector.
The GBP/USD weekly forecast indicates a brief respite for the pound as Trump’s policies weaken the dollar.
Ups and downs of GBP/USD
The GBP/USD pair had a bullish week despite a rate cut by the Bank of England. The rally came from a decline in the dollar after Trump paused tariffs on Canadian and Mexican goods.
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On Tuesday, the dollar collapsed when a 25% tariff meant for Canada and Mexico failed to take off. The two countries negotiated better trade deals, giving them more time. Meanwhile, the Bank of England lowered borrowing costs but emphasized the need for caution due to high inflation. Finally, data on Friday showed a mixed picture of the US labor sector, with both jobs and the unemployment rate easing.
Next week’s key events for GBP/USD
Next week, market participants will focus on inflation and retail sales data from the US. Meanwhile, the UK will release figures on manufacturing production and GDP. The US consumer inflation report will shape the outlook for Fed rate cuts.
In the previous month, the core CPI figure missed forecasts, indicating soft underlying price pressures. As a result, the dollar fell as rate cut expectations rose. Another month of cooler-than-expected inflation might further weigh on the dollar.
Meanwhile, the UK GDP report will show the state of the UK economy, which has been slowing down.
GBP/USD weekly technical forecast: Price briefly retreats after channel breakout
On the technical side, the GBP/USD price has broken out of its bearish channel, indicating a bullish shift in sentiment. The price now trades slightly above the 22-SMA, showing bulls are in the lead. However, the RSI remains slightly below 50, a sign that bearish momentum is still strong.
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GBP/USD has maintained a strong downtrend, making lower highs and lows and breaking past key support levels. However, bears paused when the price hit the 1.2200 support level. Here, price action showed small-bodied candles with large wicks, indicating indecision.
After that, bulls took charge by breaking above the channel resistance and the 22-SMA resistance. The price is currently retesting the SMA as support. If bulls remain in the lead, the price will climb to the 1.2800 resistance. A break above this resistance would confirm a new bullish trend.
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