Technical Analysis

GBP/USD Price Analysis – Feb 03, 2025

By LHFX Technical Analysis
Feb 3, 20254 min
Gbpusd

Daily Price Outlook

During the first half of the European session on Monday, the GBP/USD currency pair continued its downward trend, dropping to around the 1.2293 level. This decline can be attributed to market concerns triggered by the imposition of tariffs on Canada, Mexico, and China by US President Donald Trump, which spooked global financial markets and prompted investors to seek safer assets.

Moreover, the British Pound showed a mixed performance against its major peers as investors shifted their focus toward the upcoming Bank of England (BoE) monetary policy decision, set to be announced on Thursday.

GBP/USD Focuses on Bank of England's Expected Rate Cut Amid Slowing Inflation and Weak Labor Demand

The Bank of England (BoE) is expected to cut interest rates by 0.25% to 4.50%. Most of the BoE's policymakers (seven out of nine) are likely to agree with this cut. However, two members, including Catherine Mann, who tends to be more cautious, may vote to keep rates the same. This decision comes as the UK shows signs of slowing inflation and weak labor demand, making the BoE consider easing its policy.

The expectation for a rate cut is based on slowing inflation and weak job demand in the UK. The UK's core Consumer Price Index (CPI), which leaves out things like food and energy, dropped to 3.2% in December. Additionally, the labor market saw a small increase of 35,000 new jobs in the three months up to November.

Therefore, the anticipated rate cut by the BoE, driven by slowing inflation and weak job demand, could weaken the GBP, leading to potential downward pressure on the GBP/USD pair in the short term.

US Dollar Strengthens Amid Tariff Concerns and Focus on Labor Market Data

On the US front, the broad-based US Dollar surged as global market sentiment worsened, particularly following US President Donald Trump's decision to impose tariffs on Canada, Mexico, and China.

This move spooked investors, leading them to flock to the safety of the US Dollar. The US Dollar Index (DXY), which measures the Greenback’s strength against six major currencies, climbed above 109.50, its highest level in over two weeks.

Trump’s tariffs included 25% on Canada and Mexico, and 10% on China, citing concerns over illegal immigration and fentanyl. While he also threatened tariffs on Europe, he softened his stance toward the UK, noting a potential deal with Prime Minister Keir Starmer.

Investors are closely watching this week's labor market data to get a sense of how long the Federal Reserve might keep interest rates steady. After last Wednesday’s meeting, Fed Chair Jerome Powell mentioned they’d only change rates if inflation improves or the job market weakens.

On Monday, traders are paying attention to the ISM Manufacturing PMI and the revised S&P Global Manufacturing PMI. The ISM PMI is expected to rise slightly to 49.5, but it’s still below the 50.0 mark, which signals the economy could be slowing down.

Therefore, the US Dollar's strength, driven by global market uncertainty and Trump's tariff decisions, could put pressure on the GBP/USD pair, potentially causing the pound to weaken against the dollar.

GBP/USD Price Chart - Source: Tradingview
GBP/USD Price Chart - Source: Tradingview

GBP/USD – Technical Analysis

The GBP/USD pair is trading at $1.22693, down 0.97%, reflecting sustained bearish momentum as the pair struggles below key technical levels.

The price is currently hovering beneath the pivot point at $1.23076, signaling a potential continuation of the downtrend.

Notably, the 50-day Exponential Moving Average (EMA) at $1.24076 adds further pressure from above, reinforcing the bearish outlook unless a strong reversal occurs.

If sellers maintain control, immediate support is seen at $1.22284. A break below this level could accelerate declines toward $1.21595, with $1.21054 as the next critical support zone.

Conversely, if the pair manages to recover above the pivot point, initial resistance is expected at $1.23877. Surpassing this could open the door for further gains toward $1.24541 and $1.25225, though such moves may face strong selling interest given the broader bearish bias.

The technical structure favors a bearish outlook below $1.23069, with a recommended sell entry at this level. The take-profit target is set at $1.22281 to capture potential downside momentum, while a stop-loss at $1.23565 helps manage risk in case of unexpected reversals. A sustained move above the 50-EMA would be required to shift the bias towards a more bullish scenario.

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GBP/USD

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