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GBPUSD:
The Federal Reserve (Fed) maintained its forecast for two 25 basis point rate cuts in 2025 at its March meeting on Wednesday and raised its inflation outlook. Additionally, uncertainty surrounding US President Donald Trump’s trade tariffs and escalating geopolitical tensions are supporting the safe-haven US Dollar and proving to be a key factor acting as a headwind for GBP/USD.
The US Dollar Index (DXY) appears to be developing a moderate recovery from the multi-month low reached earlier this week, although significant strength still seems elusive. Investors remain wary of a slowdown in US economic activity due to tariffs, which in turn could force the Federal Reserve to resume its rate-cutting cycle sooner than expected.
Markets are now factoring in the likelihood that the Fed will cut borrowing costs in June, July and October. In contrast, the Bank of England (BoE) has cautioned against assumptions of rate cuts and has also raised its forecast for inflation to peak this year. This suggests that the UK central bank will reduce borrowing costs more slowly than other central banks, including the Fed, which provides support for GBP/USD.
Trading recommendation: BUY 1.2950, SL 1.2870, TP 1.3090
Origin: FreshForex
