The GBPUSD currency pair set new six-month highs early this week, and then it started consolidating near the reached levels. A strong wave of the pound strengthening against the dollar took a breather, following which the price may test the level of 1.34 to break it from below. September’s highs have not been updated, and GBPUSD buyers surely have a desire to complete this task before a major correction begins.
The scenario is supported by unexpectedly positive data on retail sales in the UK in March. Today’s report showed the rise by 0.4%, while the market’s consensus forecast expected the decline of 0.3%. Reuters says that just in the first quarter, UK retail sales surged 1.6%, the biggest in four years.
Bloomberg estimates that active non-food purchases could boost UK GDP by an extra 0.1% in the first three months of 2025. Traders are still expecting the Bank of England to cut its rate at the meeting on May 8, but further easing risks being less compared to previous forecasts. It should support the pound, while the outlook for the dollar is seen as increasingly gloomy.
Goldman Sachs chief economist Jan Hatzius believes the greenback will decline further amid the increasing probability of a recession. It is the weaker dollar that could reduce the US trade deficit, boost exporters' profits, and protect the national economy. Hatzius highlights just an 8% decline in the dollar from its high in early 2025. Previously, as the economic performance was deteriorating (in the mid-1980s and early 2000s) the US currency suffered losses of 25–30%.
The RSI is approaching the overbought zone on the daily chart, but the signal for a downward reversal has not developed yet. The bulls still have a good chance to break to 1.34 before a full-fledged correction starts.
Consider the following trading strategy:
Buy GBPUSD at the current price. Take profit – 1.34. Stop loss – 1.323.
This content is for informational purposes only and is not intended to be investing advice.
