GBP/USD Outlook: Likely to increase, as the rate is trading 3.6% above its recent average and near recent highs.
Key drivers:
• Rate gap: The Bank of England is moving cautiously with potential rate cuts, while the Federal Reserve may also reduce rates, which could weigh on the USD's appeal.
• Risk/commodities: The recent decline in oil prices has led to a weaker USD, making GBP more attractive for investors.
• One macro factor: Ongoing geopolitical tensions are contributing to uncertainty around the USD, causing some investors to seek safety in currencies like GBP.
Range: GBP/USD is likely to hold steady near current levels but may test recent highs as conditions evolve.
What could change it:
• Upside risk: A positive surprise in UK economic data could further support the GBP.
• Downside risk: Increased concerns over US economic stability or policy changes could lead to heightened volatility for the USD.