GBPUSD rally has stalled and risks fizzling out

GBPUSD saw a strong rebound from last week's six-month low. However, yesterday's rally was interrupted, and the price fell back to the 1.261 level during the trading session. Against the backdrop of the bulls' retreat, market participants are once again shifting to selling the pound against the dollar. The return of GBPUSD quotes to 1.261 is very likely, and with increased selling pressure, the 1.256 level may be reached.

Analysts at UBS have published a new study on the impact of the import tariffs planned by President-elect Donald Trump on the British economy. Although the UK, unlike China and EU countries, will not face direct tariffs on its products, the negative impact will be felt. European nations will reduce demand for British goods in the event of economic stagnation, which will have a downward effect on GDP growth rates for both parties.

In addition to problems in foreign trade, the UK is also threatened by weakness in domestic consumption. Today, the British Retail Consortium (BRC) released sales data for November, which showed a decline of -3.4%. Last month's result was the worst since April. Helen Dickinson, chief executive of the BRC, believes the main reason for the weak figures is the shift of much of the selling season from November to December. But she also sees a marked deterioration in consumer sentiment.

Jack Mining, chief UK economist at Barclays, points to high interest rates as the main factor behind the country's reduced spending. He believes the Bank of England should consider further monetary easing at its December meeting. Traders now estimate the extent of rate cuts by the regulator until the end of 2025 at only 0.75%. A faster cycle of lowering borrowing costs would support the British economy, but would also weaken the pound.

The Stochastic indicator on the daily chart of GBPUSD has exited the overbought zone, signaling a drop in the quotes. The bears can quickly push the price to the levels of 1.261 and 1.256.

Consider the following trading strategy:

Sell GBPUSD at the current rate. Take Profit 1 — 1.261. Take Profit 2 — 1.256. Stop Loss — 1.273.