Jan 02, 2025 (MENAFN via COMTEX) --
(MENAFN - Daily Forex)
The GBP/USD pair struggled to withstand the strength of the US dollar throughout 2024. However, the sterling's resilience crumbled rapidly following the announcement of Trump's victory in the US presidential election. As a result, the GBP/USD pair plummeted towards the support level of 1.2475, its lowest level in seven months, before stabilizing around 1.2510 in the final hours of trading in 2024. The highest level for the GBP/USD pair throughout the year was the resistance level of 1.3434, recorded at the beginning of trading in September 2024, which was the highest level for the pair in two years.
GBP Forecast for 2025
According to licensed trading platforms, despite the recent selling pressure on the pound,
Goldman Sachs remains optimistic about the fundamentals of the pound. However, RBC Capital Markets expects the strength of the pound to fade quickly if it happens. Many investment banks expect the pound to perform strongly in early 2025, but it faces increasing difficulties and may be more vulnerable later in the year. However, Forex analysts at Danske Bank believe that in the long term, some of these favourable winds for the pound appear to be fading and we expect a more accommodative Bank of England to weigh on the pound eventually future of Bank of England policies in 2025
You should note that monetary policy will remain a major focus in 2025. In this regard, the Bank of England has cut interest rates only twice in 2024 amid ongoing uncertainty surrounding inflation trends. Obviously, this shift in yields has been crucial in supporting the pound. At this stage, markets are expecting only two rate cuts by the BoE in 2025, but most investment banks are expecting a more dovish stance.
At the last meeting in 2024, there was a 6-3 vote to keep UK interest rates at 4.75% and ING is expecting a significant shift in this regard in Q1 2025; the growing dovish front evident within the Monetary Policy Committee despite the latest hawkish wage data suggests a greater focus on the slowdown in activity. This reinforces our dovish view on the BoE in 2025 - we expect 150bp cuts, versus market expectations of around 55bp.
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Expectations about US monetary policy have changed significantly in the past few weeks of 2024. In its latest meeting of 2024, the Federal Reserve suggested that it would only cut US interest rates twice in 2025. In the updated economic projections for September, the Federal Reserve showed the possibility of making four cuts in US interest rates.
Analysts note that the Fed's shift in monetary policy, which would see a slower easing cycle, makes sense as the U.S. economy is expected to remain relatively healthy at least through the first half of 2025. Overall, most major banks have trimmed their interest rate forecasts. Furthermore, Bank of America analysts were expecting only two U.S. rate cuts next year. Wells Fargo appears to be a bit more hawkish, seeing just one rate cut in 2025.
However, not all financial market analysts are convinced that the U.S. economy will be able to withstand the geopolitical uncertainty and unintended consequences of President Donald Trump's proposed policies/USD May See a Volatile Trading Year
The pound is likely to see a volatile year, with initial weakness followed by a potential recovery. This is according to Corbyn, the global payments company, which has released its 2025 outlook for major currencies. The firm sees the pound set for a turbulent 2025 due to a combination of domestic economic challenges, a potential interest rate cut. International factors, including changes in US policy. Meanwhile, the start of the year could be tough, there are factors that could support a recovery later in the year and the GBP/USD pair could break the 1.30 threshold by the end of 2025.
The firm sees the pound as likely to see a turbulent start to 2025, with weakness likely against the
US dollar amid a loss of economic momentum. According to the economic calendar data, the UK economy slowed sharply during the second half of 2024, leading to weaker labour markets, wage pressures, and lower inflation expectations. The Bank of England is expected to cut interest rates more aggressively than the markets expect. Consequently, this will limit the extent to which interest differentials can support the currency against the euro.
The company's forecast for the GBP/USD pair is 1.27 in the first quarter, 1.28 in the second quarter, 1.29 in the third quarter, and 1.30 in the fourth quarter Tips:
The performance of the GBP/USD in the new year will not be stable as it awaits the reaction to factors that move prices strongly. Therefore, caution and good observation of what Trump decides in the US and globally are necessary Analysis for the GBP/USD pair today:
According to recent trades, the movements of the GBP/USD pair support the psychological support level of 1.25 as a temporary floor for the GBP/USD pair, and while it is now in the process of breaking above the nine-day exponential moving average (EMA). Therefore, a successful close above this technical indicator - currently at 1.2579 - would strengthen the improved tone in the near term and open the door to further gains in the first part of January 2025.
However, it should be considered that the
US dollar has risen for most of December after the Federal Reserve cut US interest rates but indicated that it has become more cautious about cutting interest rates, which will help maintain US bond yields afloat. For the dollar, this means a stronger trade for a longer period that could extend into 2025. Given the underlying background, GBP/USD gains are likely to be temporary, and the first quarter of 2025 may bring new declines with the minimum of 1.2330. And from there, all technical indicators move towards oversold levels.
EURUSD Chart by TradingView
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