GBP/USD Technical and Fundamental Analysis – 2025 Outlook

GBP/USD Technical and Fundamental Analysis – 2025 Outlook

• The GBP/USD pair, commonly known as “Cable,” continues to be the most traded currency pair in the Forex space.
• Continuing into 2025, the spare shows measured historical volatility
• and the ongoing circulations of economic trends continued from the UK and the US.
• In this article, we will analyse the technical and fundamental situation for GBP/USD,
• and what may be expected from this commonly used Forex instrument over the remainder of the year.
• Fundamental Analysis of GBP/USD in 2025

1. UK Economic Factors
   The United Kingdom enters into 2025 with still fragile but recovering economy.
2. Key considerations for GBP includes:
   Interest Rates – The Bank of England (BoE) has been somewhat conservative in its approach to interest rate in the first quarter even considering that inflation is cooling and consumer spending has declined by holding rates steady at 4.5%. Although wage growth is improving, which is a suggestion that more interest rate hikes are expected; Inflation – Its noted that inflation in the UK dropped to an average of 3.2% in early 2025 after reaching 7.5% in 2023.
3. While its a move in the right direction, it lies well above the BoE target of 2%% which remains a concern for policy expectations; Brexit Consolidation – Even over two years post Brexit the UK is still facing significant trade friction with the EU and other global partners which is weighing heavily on UK exports. This structural overhang likely keeps the pound relatively dormant against the dollar; Political Stability – There are pending general elections ahead.

2. American Economic Conditions

The American economy continues to be robust into 2025 mainly supporting dollar strength.

      Federal Reserve Policy:  The Fed has stated it will 'pause' any increase in interest rates in Q1 2025 maintaining its rate at 5.0%. It however appears as if the US central bank remains hawkish, given solid GDP growth and still tight labour markets.

      Inflation & Jobs:  The core inflation rate in the US is around 2.6% and unemployment is very low at (3.9%) so this is reflecting USD demand coming from global investors.

      Geopolitical Risk: The US dollar continues to get support from safe haven flows given steady geopolitical uncertainty as a consequence of continued unpredictable conflict in the middle East and heightened tensions between China and Taiwan.

3. Macroeconomic Overview
   Indicators UK US
   Interest Rate 4.5% 5.0%
   Inflation 3.2% 2.6%
   Unemployed 4.4% 3.9%
   GDP 1.2% 2.3%
   Currency Bias Neutral – Uptrend
   Bearish

Technical Review of GBP/USD – June 2025

Market Sentiment & Outlook

• Market sentiment on GBP/USD in 2025 is cautiously bullish with a near-term bias but is neutral to bearish with a longer-term bias.
• The longer-term bias could be helped by the UK being constrained in its growth or if the US dollar regains strength as investors go risk-off globally.
• Near-Term Outlook (Next 1-3 months)

If the BoE satisfies the market with a hawkish pivot, GBP/USD tests 1.2750 – 1.2850 if US inflation continues to moderate.

A break below 1.2600 would suggest fresh bearish momentum targeting 1.2460.

Medium to Long-Term Outlook (6 – 12 months)

If there is no stronger economic data escape route the UK can offer and if the Fed is on pause GBP/USD likely drifts to or below 1.2300.

Conversely, if the Fed signals a dovish shift or UK-EU trade relations improve, GBP/USD could be above 1.3000.

Ideas for trading in 2025

Swing Trading: Ideal trade plans could use the technical levels to establish entries and consider 1.2600 and 1.2850 as target zones.

News Trading: Trading news events could focus on BoE meetings, UK inflation prints, and Fed rate decision weeks.

Hedging: Long GBP/USD positions can be hedged with options (e.g.. during political event weeks in UK).

Potential Risks

Any rate changes from BoE or Fed present little chance for GBP/USD.

Inflation and recessions occur in unexpected quarters for either economy.

Geopolitical changes lead to increased safe-haven USD sentiment.

The political landscape in the UK changes dramatically (e.g. election outcomes).

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