FX.co ★ GBP/USD

The British pound (GBP) experienced a rollercoaster ride against the US dollar (USD) on Friday. Early Asian trading saw the GBP/USD pair climb to around 1.2525, rebounding from a five-month low of 1.2445. This upswing came after the Bank of England (BoE) surprised markets with a dovish stance at its policy meeting. The BoE opted to maintain interest rates at 5.25%, marking their sixth consecutive hold. However, they hinted at the possibility of rate cuts as soon as next month, provided inflation continues its downward trajectory. Governor Bailey acknowledged the potential for a June rate cut but emphasized data dependence on inflation, economic activity, and the labor market. This dovish shift from the BoE, while initially boosting the pound, introduced future pressure. The prospect of lower interest rates in the UK weakens the pound relative to the USD, potentially limiting the GBP/USD pair's gains. Adding to the complexity, comments from San Francisco Fed President Mary Daly cast a shadow of doubt on the US Federal Reserve's plans. Daly expressed concerns about heightened inflation uncertainty and the potential need for a prolonged period of current interest rates to combat it. This divergence in policy stances between the BoE and the Fed could further weigh on the pound.

Despite earlier gains, the GBP/USD pair struggled to break above key technical resistance levels. The pair initially surpassed the 200-day moving average but failed to breach the 50-day moving average and the downtrend line established since March. This technical weakness suggests a potential pullback towards April's support level of 1.2405. A further decline could see the pair retest its five-month low at 1.2298, with a break below this area potentially exposing November 2023 support at 1.2186. However, there's still hope for the pound. Renewed buying pressure could push the pair back above the downtrend line, targeting the April-May resistance zone of 1.2564. A decisive break above this area could pave the way for a potential turning point near 1.2632. Overcoming this hurdle might even challenge the April peak of 1.2708. Overall, the GBP/USD pair faces crosscurrents. The BoE's dovish stance and potential policy divergence with the Fed create headwinds for the pound. However, technical indicators hint at potential buying opportunities if the pair can overcome key resistance levels. The coming days will be crucial in determining the GBP/USD's near-term direction.