**Pound to Dollar Forecast: GBP Struggles Amid Trade Tensions and Powell Focus**
*Original reporting by Exchange Rates UK*
The pound to US dollar (GBP/USD) exchange rate remains under pressure as the forex market grapples with a blend of domestic uncertainty, international trade tensions, and looming Federal Reserve policymaker speeches. This article delves deep into the factors weighing on sterling, analyzes pivotal economic data sets, and outlines key scenarios for traders and investors in the coming sessions.
**Current GBP/USD Rate Overview**
– At the time of writing, GBP/USD oscillates close to 1.2280, having lost ground through the week.
– The pair has retreated from its mid-term highs, reflecting a notable change in global risk appetite.
– With the UK economic calendar relatively light, traders’ attention is acutely fixed on transatlantic influences, especially on US central bank commentary and signals on interest rate direction.
**Key Drivers Shaping the GBP/USD Outlook**
1. **UK Economic Uncertainty**
– UK GDP figures have signaled stagnation, tightening the outlook for sterling.
– Recent PMI surveys indicate a slowdown in both manufacturing and services, with the composite reading barely in expansion territory.
– Headwinds are projected from fragile consumer confidence and persistent inflation, prompting concerns over potential contraction later in the year.
2. **Bank of England Monetary Policy**
– The Bank of England’s dovish tilt during its latest Monetary Policy Committee (MPC) meeting continues to weigh on GBP.
– Core inflation in the UK remains sticky, but sluggish growth is limiting the bank’s capacity for further rate hikes.
– Market-implied odds for future tightening have fallen sharply, limiting sterling’s support.
3. **US Dollar Strength and Federal Reserve Focus**
– The US dollar index remains elevated amid robust economic data and hawkish rhetoric from several Fed officials.
– The Federal Reserve’s “higher for longer” narrative on interest rates strengthens the dollar and makes risk currencies like sterling less attractive in the short term.
– Key US data releases, including CPI and jobs data, have repeatedly beaten consensus expectations, further underpinning USD gains.
4. **Escalating Global Trade Tensions**
– Intensified trade tensions, particularly between the US and China, have dampened optimism in risk markets and led to a preference for safe-haven assets like the US dollar.
– UK exporters remain vulnerable to any disruption in global trade flows, a factor adding indirect pressure on GBP.
5. **Political and Brexit-Related Risks**
– Unresolved issues surrounding the implementation of the Northern Ireland Protocol and fears of renewed trade disputes with the EU keep a lid on sterling’s upside.
– Upcoming elections in the UK and political maneuvering could add to short-term volatility.
**Upcoming Risks: Jerome Powell’s Testimony and US Data**
A significant focus for market participants is the upcoming testimony from Federal Reserve Chair Jerome Powell. His comments are expected to clarify the central bank’s stance on future rate moves, volatility, and the broader economic outlook.
– Hawkish rhetoric is likely to bolster the US dollar further and weigh on GBP/USD.
– Should Powell hint at slower growth or express concerns about inflation, expectations of delayed rate cuts could shake currency markets.
Additionally, traders are keenly watching for:
– US Retail Sales and Unemployment Claims
– UK Inflation and Retail Sales Data
– Hawkish or dovish commentary from other Federal Reserve board members and Bank of England officials
**Technical Analysis: GBP/USD Chart Patterns**
A review of key technical signals paints a cautious picture for those hoping for a sterling rebound.
*Support and Resistance Levels:*
– Initial support is seen at 1.2200, with further downside risk toward 1.2150 if bearish momentum persists.
– Upside resistance is situated at 1.2320, followed by a heavier ceiling at 1.2400.
*Moving Averages and Indicators:*
– GBP
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