FX Report: 3rd - 6th February 2025
Buy Side Target
1.2750
Sell Side Target
1.2200
Current Price
1.2320
If sellers remain in control, there is a strong likelihood of price pushing downwards toward the highlighted grey zone around the 1.22000 level. Alternatively, if buyers step back in, the price may rise toward the 1.27500 region. These key levels provide critical insights for potential market movements and will guide our focus in the days ahead.
UK Economic Developments
- Inflation Trends: December's annual inflation rate eased slightly to 2.5% from November's 2.6%, remaining above the Bank of England's (BoE) 2% target. This persistent inflation complicates the BoE's monetary policy decisions.
- Monetary Policy Outlook: The BoE's Deputy Governor, Sarah Breeden, acknowledged signs of easing inflation but emphasized a cautious approach to policy adjustments, suggesting a gradual removal of policy restrictiveness over time.
US Economic Developments
- Trade Tensions: The U.S. has imposed 10% tariffs on Chinese imports, prompting China to retaliate with tariffs on American products. These actions have led to market fluctuations, with European stocks and the dollar opening lower.
- Federal Reserve Policy: The Federal Reserve has paused its rate-cutting cycle after three consecutive cuts in 2024, maintaining the federal funds rate at 4.25% - 4.5%. Fed Chair Jerome Powell emphasized a cautious approach, indicating no rush to cut rates further until more progress in inflation is observed.
GBP/USD Outlook
- Current Sentiment: The GBP/USD pair is experiencing indecisiveness, with market participants awaiting further economic data and central bank guidance.
Implications for GBPUSD
- BoE Policy: Hawkish stance supports GBP; dovish signals weaken GBP.
- Fed Policy: Delayed rate cuts strengthen USD; weaker US data may weaken USD.
- US-China Trade Tensions: Escalation boosts USD (risk-off), easing tensions weakens USD.
Last FX Report: 28th January - 3rd February 2025
Buy Side Target
1.2750
Sell Side Target
1.2250
Current Price
1.2320
Market Outcome
Bearish
As highlighted in last week's analysis, if the price moved lower, it was expected to first test the 1.22500 level, with 1.22000 as the next key support if that level failed. This projection played out accurately, as the price respected 1.22500 and has since begun to rise. Looking ahead, if the price maintains support and consolidates above 1.24500, there is a strong likelihood of further upside momentum, potentially driving the price toward the 1.27500 region as previously anticipated.
Identifying the bearish strength for GBPUSD, we capitalised on any buying opportunities the market presented using our proprietary tools and strategy.
*Contracts for difference (CFDs) are complicated financial contracts based on leverage, which can possibly result in huge fluctuations in profits or losses. Therefore, it is essential to study and understand CFDs thoroughly before embarking on investment. You should at the same time stay conscious and ready yourself for the potential risk of losing a part or your whole capital. This outlook is non-financial advice, you should consult with your personal financial advisor before making any investment decisions.
How we traded this outlook:
