GBP/USD Outlook: The outlook is likely to increase, supported by the pound trading well above its recent average and near its recent highs.
Key drivers:
- The Bank of England maintains a cautious stance on rate cuts, which helps strengthen the pound against the US dollar.
- Recent oil prices have remained relatively stable, which tends to support overall market confidence and consequently boosts the pound.
- Concerns over potential US tariffs affecting the UK economy linger, adding pressure on the pound but not decisively weakening it at this time.
Range: GBP/USD is expected to drift within its recent range, considering current market volatility and mixed signals regarding geopolitical tensions.
What could change it:
- An upside risk could arise from stronger-than-expected economic data in the UK prompting a reassessment of rate cut expectations.
- A downside risk could emerge if US inflation data shows persistent price pressures, leading to increased rate cut bets by the Federal Reserve and strengthening the dollar.