GBP/USD Outlook: Likely to increase, as the rate is at recent highs and supported by UK economic conditions.
Key drivers:
• Rate gap: The Bank of England is cautious about rate cuts, while the Federal Reserve plans to maintain a neutral stance, leading to a narrowing interest rate difference that might favor the GBP.
• Risk/commodities: Ongoing global trade tensions, particularly US tariffs impacting the UK, can create volatility in GBP, while uncertainty around US economic policies may maintain interest in the dollar.
• One macro factor: The UK's GDP growth is forecasted to slow, but a strong labor market with lower unemployment may lend some support to the pound.
Range: GBP/USD is likely to hold near recent highs, potentially drawing attention towards the upper end of its trading range.
What could change it:
• Upside risk: A significant improvement in UK economic data could strengthen the pound further.
• Downside risk: Any escalation in US tariffs or lack of clarity in US economic policy could pressurize the GBP.
