Profit taking and dollar strength to accelerate GBPUSD decline

The GBPUSD currency pair quotes are declining on Friday, trading below the psychological level of 1.3000. The pair's current dynamics largely depend on fluctuations in the US dollar.

The Federal Reserve (Fed) confirmed its forecast of two 25-basis-point rate cuts in 2025 and raised the inflation outlook at its monetary policy meeting on Wednesday. This decision, along with uncertainty over US President Donald Trump's tariff policy and rising geopolitical tensions, is contributing to the dollar's strength. As a result, the dollar index is recovering from a multi-month low reached this week. However, investors remain concerned about a slowdown in US economic activity due to the tariffs. This could prompt the Fed to resume its rate-cutting cycle sooner than expected.

Markets are taking into account chances of monetary easing in the United States in June, July, and October. Unlike the Fed, the Bank of England maintains a more cautious stance and excludes rate cuts in the near future.

At the same time, no significant economic data is expected to be released either from the UK or the US on Friday. This fact alongside with the current fundamental background increases the probability of profit taking by the pair’s buyers.

From a technical point of view, the GBPUSD quotes are in an uptrend on the daily timeframe (D1). The wave structure on H4 indicates that the fourth downward wave is forming, as the Relative Strength Index (RSI, 14) shows a prolonged divergence. This confirms the weakening of the last ascending wave and a possible trend change.

Short-term prospects for GBPUSD currency pair suggest selling with the target of 1.2685. Part of the profit should be taken near the level of 1.2820. A Stop loss could be set at 1.3100.

Since the bearish scenario is short-term, the trading volume should not exceed 2% of your total balance to reduce risks.