GBPUSD:
The GBP/USD pair has started the new week on a slightly positive note, partially recovering from Friday’s decline, although this rise is inconsistent and lacks bullish confidence. Spot prices are currently trading around 1.2180, up less than 0.10% on the day, and remain near the lowest level since November 2023, which was reached last week.
The US Dollar (USD) is attempting to capitalise on Friday’s positive movement amid expectations that the Federal Reserve (Fed) is not ruling out the possibility of a rate cut before the end of this year.Additionally, the overall positive risk-off tone is undermining demand for the safe-haven greenback, which provides some support to the GBP/USD pair. However, this combination of factors could potentially exert a negative influence on spot prices, thus necessitating a degree of caution from bullish traders.Investors appear convinced that the protectionist policies of the recently elected US President, Donald Trump, could potentially lead to higher inflation, thereby compelling the Fed to adopt a more hawkish stance.In addition, the Fed is expected to pause its rate-cutting cycle later this month, a development that should limit any losses suffered by the dollar. Additionally, the risk of stagflation, along with concerns regarding the UK’s financial stability, may deter traders from making bullish bets on the British pound, thereby limiting the upside potential of GBP/USD.Furthermore, the recent release of mixed UK macroeconomic data has increased the likelihood of a 25 basis points rate cut by the Bank of England (BoE) at its next meeting on 6 February. Therefore, it would be prudent to wait for strong follow-through buying before confirming that the GBP/USD pair has formed a short-term bottom and positioning for any meaningful strengthening move in the absence of any market-critical economic data on Monday.
Trading recommendation: We follow the level of 1.2200, if we consolidate above it we consider Buy positions, if we rebound we consider Sell positions.
