FX Report: 28th January - 3rd February 2025
Buy Side Target
1.2750
Sell Side Target
1.2250
Current Price
1.2450
The GBP/USD pair is currently influenced by contrasting economic signals: the UK's modest growth coupled with rising inflation and employment challenges, against a resilient US economy with a cautious Federal Reserve. Traders should monitor upcoming economic data releases and central bank communications closely, as these will play crucial roles in determining the pair's direction in the near term.
Since Monday, the outlook for GBP/USD has remained unchanged, with the pair currently in a phase of indecisiveness. If buyers maintain control, there is still a strong likelihood of price pushing upwards toward the highlighted grey zone around the 1.27500 level. Alternatively, if sellers step in, the price may decline toward the 1.22000 region. These key levels continue to provide critical insights for potential market movements and will remain our focus in the days ahead.
1. UK Economic Indicators
- Business Activity: January's S&P Composite Purchasing Managers' Index (PMI) edged up to 50.9 from December's 50.4, indicating marginal growth. However, this uptick is accompanied by intensified price pressures and employment contractions, posing challenges for the Bank of England (BoE).
- Inflation Concerns: Private sector firms reported the fastest increase in average prices in 18 months, signalling resurging inflation. This complicates the BoE's decision-making, especially with significant layoffs occurring at the highest rate since the 2021 COVID-19 peak.
2. Bank of England's Monetary Policy
- Interest Rate Outlook: Investors anticipate that the BoE may implement two to three quarter-point rate cuts in 2025, starting in February, to stimulate the slowing economy. However, rising inflationary pressures could limit the central bank's capacity for further cuts.
3. US Economic Indicators
- Federal Reserve's Stance: 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.
- Upcoming Data: The forthcoming US GDP data is expected to show a 2.7% growth in the fourth quarter, reflecting a robust economy. This data will be pivotal for GBP/USD traders as it may influence the Federal Reserve's future policy decisions.
Last FX Report: 20th - 28th January 2025
Buy Side Target
1.2450
Sell Side Target
1.2000
Current Price
1.2450
Market Outcome
Bullish
Last week's discussion concluded that if buyers gain control, there is a strong likelihood of price pushing upwards toward the highlighted grey zone around the 1.24500 level. Conversely, if sellers dominate, the price may decline toward the 1.2000 region. These key levels provided critical insights for potential market movements and guided our focus in the days ahead. As we can see above, once buyers stepped in price continued to rally towards our 1.24500 target.
*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:
