At the start of the week, GBPUSD was trading close to its medium-term uptrend line. Unlike in early April, sterling bulls had little difficulty engineering a rebound. The pair is now trying to extend its move higher, but it must first retest resistance at 1.34. Both the macro backdrop and recent news flow lean in the pound’s favor.
Yesterday, the UK Office for National Statistics reported Q1 2025 GDP figures. Output beat expectations on both a quarterly and an annual basis. Furthermore, the British economy's growth rate from January to March was the strongest among G7 nations. The contrast with the United States, whose GDP has slipped into negative territory, is particularly stark. While the US may recover later in the year, the data currently being released paint a pessimistic picture.
For example, yesterday’s producer-price data showed US firms cutting prices by 0.5 % in April, the biggest drop since 2009. Retail sales inched up just 0.1%, a sharp slowdown from March’s 1.7% gain. According to Michael Pearce, chief US economist at Oxford Economics, consumer demand is likely to cool further. Even successful trade talks with China would only soften, not reverse, that trend.
Bloomberg analysts now expect the Bank of England to revise its annual GDP-growth forecast upward. The current 1% estimate is likely to be surpassed, helped by the recently agreed 10% tariff deal with the United States. Although these duties will weigh on the UK economy, the drag should be milder than that faced by many other countries.
Technically, the daily RSI and Stochastic are both rising while still well away from overbought territory, increasing the odds that GBPUSD will soon retest the 1.34 level.
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.
