GBP/USD Outlook: The outlook for GBP/USD is likely to increase as the exchange rate is above its recent average and near recent highs, supported by positive UK economic indicators.
Key drivers:
• Rate gap: The Bank of England's cautious stance on interest rates contrasts with the Federal Reserve's intention to cut rates, making GBP relatively more attractive.
• Risk/commodities: A decline in US dollar value due to geopolitical tensions and fiscal issues could further support the pound.
• One macro factor: UK retail sales and PMI figures have recently exceeded forecasts, which is boosting confidence in the pound.
Range: GBP/USD is expected to hold within its current range after reaching an 18-week high, with potential for limited movement above the average.
What could change it:
• Upside risk: A significant improvement in UK economic data could drive the pound higher.
• Downside risk: Escalation of geopolitical tensions could lead to volatility and pressure on GBP.