**GBP/USD Reverses Ahead of March Low, Sparks Three-Day Rally**
*Adapted from original analysis by Fiona Cincotta, Forex.com*
The British pound (GBP) has experienced a notable reversal against the US dollar (USD) in early April 2025, as the GBP/USD currency pair bounced ahead of its March low and ignited a robust three-day rally. This market move follows weeks of downward pressure, which saw traders recalibrate their expectations for both the Bank of England (BoE) and the US Federal Reserve (Fed). This article explores the drivers behind Sterling’s fresh momentum, assesses the underlying technical structure, and highlights key levels and potential scenarios for GBP/USD over the coming sessions.
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**Fundamental Backdrop: Shifting Rate Expectations and Economic Data**
Throughout March and into April, market sentiment around both the sterling and the dollar has ebbed and flowed on the back of central bank rhetoric and evolving macroeconomic data.
– **Bank of England Policy Signals:**
– The BoE opted to keep interest rates steady at its last meeting but, notably, Governor Andrew Bailey and other policymakers have adopted a slightly more dovish tone, hinting that a rate cut could be considered this summer if inflation trends lower as projected.
– Recent UK economic indicators have been mixed. Headline CPI continues to fall, but services inflation and wage growth remain stubborn, complicating the BoE’s calculus.
– Traders had begun pricing in a BoE rate cut as soon as June or August, putting pressure on the pound through March.
– **US Federal Reserve Influence:**
– Across the Atlantic, the Fed’s outlook remains deeply influential for major currency pairs like GBP/USD.
– Strong US macro data, including resilient employment numbers and stickier-than-expected inflation readings, have led investors to question the likelihood of swift or aggressive Fed rate cuts in 2025.
– Recent speeches from Fed officials have reinforced a “wait and see” approach, suggesting fewer rate cuts compared to earlier in the year.
– In March, this dynamic boosted the dollar, applying further downside to GBP/USD.
– **Market Reaction:**
– With both central banks projecting a cautious path forward, the GBP/USD pair found itself under persistent selling pressure, falling steadily throughout March and testing key technical support near the January and February lows.
– The pair finally staged a turnaround in April, fuelled by profit-taking on dollar positions and renewed confidence in the UK’s economic outlook following better than expected GDP growth data.
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**Technical Picture: GBP/USD Finds Its Footing**
Chart analysis suggests that GBP/USD had become heavily oversold by late March, setting the stage for a corrective move.
– **Key Support Zone:**
– The pair reversed just ahead of the March low (approximately 1.2550) which coincided with the January swing low–a region that had previously served as a powerful support base.
– Historical price action showed strong buying interest below 1.2600, emboldening dip-buyers as bearish momentum waned.
– **Short-Term Rally:**
– In the past three sessions, GBP/USD has recovered toward the mid-1.2700s, carving out a three-day rally that has already neutralized a portion of March’s losses.
– The move has come with rising volumes and a bullish shift in short-term momentum indicators, such as the RSI, which has bounced from oversold territory.
– **Resistance Levels to Watch:**
– Immediate overhead resistance is clustered around the 200-day moving average (circa 1.2740-1.2750 zone).
– A clean break above here could see GBP/USD target the late-March swing high around 1.2800.
– Secondary resistance sits at the psychologically important 1.2850 level, last visited before the March selloff accelerated.
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**Key Drivers for the Next Leg:**
While the technical environment is
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