- GBP/USD scales higher for the sixth successive day and the prevalent USD selling bias.
- The US-China trade war weakens confidence in the US economy and weighs on the USD.
- The divergent Fed-BoE policy expectations also support the pair ahead of UK jobs data.
The GBP/USD pair attracts buyers for the sixth straight day and climbs above the 1.3200 mark, hitting a fresh high since October 2024 during the Asian session on Tuesday. Moreover, the bearish sentiment surrounding the US Dollar (USD) suggests that the path of least resistance for spot prices remains to the upside.
Investors remain concerned about the potential economic fallout from the escalating US-China trade war. In fact, China increased its tariffs on US imports to 125% on Friday in retaliation to US President Donald Trump’s decision to raise duties on Chinese goods to an unprecedented 145%. The US still imports several hard-to-replace materials from China and the development weakens confidence in the US economy, which, in turn, keeps the USD bulls on the defensive and lends support to the GBP/USD pair.
Moreover, investors have been pricing in the possibility that the Federal Reserve (Fed) will resume its rate-cutting cycle soon and lower borrowing costs by 90 basis points by the year-end. Apart from this, a generally positive risk tone, bolstered by Trump’s temporary tariff reprieve, undermines the safe-haven buck. The British Pound (GBP), on the other hand, draws support from slightly less chance of a Bank of England (BoE) interest rate cut next month. This is seen as another factor acting as a tailwind for the GBP/USD pair.
Even from a technical perspective, the overnight sustained breakout and acceptance above the 1.3100 mark validate the near-term positive outlook. Hence, a subsequent move up towards testing the next relevant hurdle, near the 1.3260 area, looks like a distinct possibility. Traders, however, might opt to wait for the release of the UK monthly jobs report and the Empire State Manufacturing Index from the US. This, along with trade developments, might influence the USD and provide some impetus to the GBP/USD pair.
Economic Indicator
ILO Unemployment Rate (3M)
The ILO Unemployment Rate released by the UK Office for National Statistics is the number of unemployed workers divided by the total civilian labor force. It is a leading indicator for the UK Economy. If the rate goes up, it indicates a lack of expansion within the UK labor market. As a result, a rise leads to a weakening of the UK economy. Generally, a decrease of the figure is seen as bullish for the Pound Sterling (GBP), while an increase is seen as bearish.
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