GBP/JPY Extends Rally to Four-Day Highs as US-China Trade Thaw Undermines Yen’s Safe-Haven Appeal

Economic

Summary:

The British Pound climbed against the Japanese Yen, buoyed by improved US-China trade relations and a cautiously dovish Bank of England, while the Yen weakened as demand for safe-haven assets ebbed.

BUY GBPJPY

Close Time

CLOSED

194.994

Entry Price

198.500

192.000

207.121 +0.021 +0.01%

60.3

Pips

Loss

192.000

194.391

Exit Price

194.994

Entry Price

198.500

The British Pound extended its rally against the Japanese Yen into a fourth consecutive session on Monday, with the currency pair GBP/JPY trading near 194.90 during European hours. A convergence of geopolitical optimism, diverging monetary policy expectations, and firm technical support continues to bolster the cross. The most notable driver this week is a reduction in safe-haven demand for the Yen after the United States and China issued a rare joint statement reaffirming their economic cooperation—a move that has triggered renewed risk appetite across financial markets.

The gains in GBP/JPY mark a continuation of bullish momentum that began late last week, supported by both fundamental and technical factors. The Japanese Yen, traditionally a magnet for capital in times of uncertainty, weakened after U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier Liu He concluded a high-level trade dialogue in Geneva. The talks resulted in a commitment to a 90-day tariff truce and a striking 115% reciprocal reduction in existing trade levies. While specific enforcement mechanisms remain vague, the tone of the meeting reflected a deliberate pivot away from confrontation and toward mutual economic benefit.

"The path to trade normalization is never linear," Bessent remarked at the close of the summit, "but our respective economies—and the global economy—stand to gain significantly from sustained dialogue and practical de-escalation." U.S. Trade Representative Jamieson Greer echoed this sentiment, though he warned that lingering disputes, such as the fentanyl crisis, are far from resolved.

These developments have reverberated across currency markets, undermining the Japanese Yen's haven appeal. A weakening Yen generally inflates GBP/JPY, and Monday's price action confirmed traders' willingness to pivot into risk-aligned pairs. However, the Yen’s downside may be limited in the near term due to resilient domestic macroeconomic data. Japan’s current account surplus rose to JPY 3.68 trillion in March, up from JPY 3.45 trillion a year earlier. The improvement was underpinned by a modest trade surplus of JPY 516.5 billion, driven by a 1.8% year-over-year rise in exports—evidence that external demand remains a bright spot for the Japanese economy.

Meanwhile, the British Pound has found its own legs after the Bank of England (BoE) reaffirmed its measured approach to monetary easing last Thursday. While the central bank delivered a widely expected 25 basis point rate cut—bringing the benchmark rate to 4.25%—the internal division within the Monetary Policy Committee (MPC) hinted at a cautious outlook rather than an aggressive pivot. Notably, Catherine Mann and Chief Economist Huw Pill dissented, voting to keep rates unchanged. Their skepticism reflects ongoing concerns about domestic inflationary pressures.

Speaking at an economic forum on Friday, Pill elaborated on his position: “While headline inflation has eased, underlying price dynamics suggest more persistence. We must be deliberate. The risks posed by external shocks—like recent tariff announcements—are being absorbed well by the UK economy so far.”

Market participants took these comments as a signal that the BoE remains some distance away from a full-fledged easing cycle. As a result, interest rate differentials between the UK and Japan—where the Bank of Japan remains anchored near zero—have widened further, supporting the Pound against the Yen.

Technical Analysis

From a technical standpoint, GBP/JPY continues to signal upward momentum. The pair opened the week with a bullish price gap, breaking out above the key resistance level of 193.45, a former ceiling that had capped gains through April. Intraday moves saw price action comfortably exceed the 195.00 handle, suggesting bulls are firmly in control.

Indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in bullish territory, while price structure shows a clear series of higher highs and higher lows. Analysts note that if GBP/JPY can sustain its current breakout, the next immediate resistance lies at 196.80, followed by a psychological barrier at 198.50.

TRADE RECOMMENDATION

BUY GBPJPY

ENTRY PRICE: 195.00

STOP LOSS: 192.00

TAKE PROFIT: 198.50

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

If USDJPY manages to break above its current descending trendline, this could pave the way for a bullish extension toward the 151.26 area.

BUY USDJPY

Close Time

CLOSED

145.269

Entry Price

151.250

139.800

155.551 +0.206 +0.13%

328.5

Pips

Profit

139.800

148.554

Exit Price

145.269

Entry Price

151.250

On Thursday, President Donald Trump described what he called a significant breakthrough in trade relations with the United Kingdom and hinted that tariffs on Chinese imports could be eased ahead of the next round of high-level negotiations between Washington and Beijing. Simultaneously, he reignited criticism of Federal Reserve Chair Jerome Powell, once again drawing attention to the ongoing tensions between the White House and the Fed regarding the direction of monetary policy.

Despite sustained political pressure, the Federal Reserve held interest rates steady for a third consecutive meeting on Wednesday. The central bank cited heightened economic uncertainty as the primary reason for maintaining its cautious approach, pushing back against growing calls from the administration for further rate cuts.

During the post-meeting press conference, Fed Chair Powell reaffirmed the Fed’s commitment to a data-driven strategy, emphasizing that the central bank will proceed with care as it evaluates the broader effects of trade developments on inflation, labor markets, and overall economic conditions. “There is no need to move hastily,” Powell noted, pointing to the unpredictable nature of international trade negotiations and their potential ripple effects on the domestic economy.

“We cannot predict how this situation will play out,” Powell admitted, while emphasizing that economic uncertainty remains unusually high. He reassured markets that the Fed stands ready to act if conditions warrant a policy adjustment but reiterated that the current stance remains appropriate given the information currently available.

The Federal Open Market Committee (FOMC) unanimously voted to maintain the federal funds rate within the 4.25% to 4.50% range—a level last seen in late 2024 following a full percentage point reduction implemented in the previous autumn. In its official statement, the central bank acknowledged that uncertainty had “further increased,” but also noted that the underlying pace of economic growth remains “solid,” even if distorted by volatility in trade-related data early in 2025.

Meanwhile, wage data released earlier today in Japan showed a generally disappointing performance for March. Despite wage agreements with unions having exceeded 5% over the past two years, actual income growth continues to lag well behind those figures. Annual wage growth came in at just 2.1%—a figure that, while nearly double pre-pandemic levels, still reflects a continued erosion in real purchasing power due to persistently high inflation. As a result, real wages declined by a further 2.1% year-on-year in March, highlighting the strain on household finances.

Minutes from the Bank of Japan’s March 19 meeting reinforced expectations that the central bank is unlikely to pursue an aggressive tightening path. One board member suggested that after a potential upcoming rate hike, the BoJ might need to shift from its current accommodative policy stance to a more neutral approach.

Since that March meeting, the BoJ has further softened its hawkish tone. At its May 1 meeting, the central bank lowered its growth and inflation projections, signaling a more cautious outlook. The swaps market now reflects expectations of only one additional 25 basis point hike, which would bring the policy rate to 0.75% over the next two years. Bullish Momentum Could Accelerate if Downtrend Line Breaks_1

Bullish Momentum Could Accelerate if Downtrend Line Breaks_1

Technical Analysis

USDJPY recently failed to make a new lower low around the 140.00 area—a level last reached on April 22—indicating a possible loss of bearish momentum. Instead, the pair found renewed buying interest from this zone, which significantly reduces the likelihood of a sustained downtrend in the near term. If USDJPY manages to break above its current descending trendline, this could pave the way for a bullish extension toward the 151.26 area.

The 100-period and 200-period moving averages are currently sitting at 150.46 and 149.56, respectively, aligning closely with a previously tested support zone. These levels may now act as the next upward targets should the pair confirm a breakout. Conversely, another test of recent lows—followed by a break beneath—would invalidate the bullish outlook and potentially trigger further downside pressure.

Trading Recommendations

Trading direction: Buy

Entry price: 145.25

Target price: 151.25

Stop loss: 139.80

Validity: May 21, 2025 15:00:00

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The EUR/USD pair weakened further to trade near 1.1230 during Friday’s Asian session, under pressure from robust U.S. labor data and renewed optimism around U.S. trade engagements.

SELL EURUSD

Close Time

CLOSED

1.12600

Entry Price

1.10000

1.14000

1.16495 +0.00069 +0.06%

152.4

Pips

Profit

1.10000

1.11076

Exit Price

1.12600

Entry Price

1.14000

The euro faced intensified selling pressure during Friday's early trading hours in Asia, with the EUR/USD pair sliding to around 1.1230 as investors favored the U.S. Dollar amid a backdrop of strong American economic data and evolving trade headlines. The pair had initially trimmed some of its daily losses, but the move ultimately failed to hold as sentiment tilted more decisively in favor of the greenback.

A key catalyst behind the dollar's outperformance was the latest release of U.S. jobless claims data, which surprised markets with a stronger-than-expected outcome. Initial jobless claims declined to 228,000 for the week ending May 3, down from the previous week’s unrevised reading of 241,000. While the four-week moving average nudged slightly higher to 226,000, the headline drop in weekly claims reinforced the narrative of a still-resilient labor market. Adding to this optimism was a decline in continuing jobless claims, which fell by 29,000 to 1.879 million, suggesting that Americans are still finding jobs relatively quickly, despite a murky global economic backdrop.

The strength of the U.S. economy was not the only factor drawing investor attention. On the geopolitical front, President Donald Trump added a layer of intrigue by announcing what he described as a “major” trade deal with the United Kingdom. Despite the headline-grabbing language, financial markets reacted cautiously. A 10% tariff on select goods remains in place, which tempered enthusiasm and left traders wary of calling this a genuine turning point in the broader trade landscape. Nonetheless, the announcement injected a dose of optimism into dollar sentiment, especially as the United States also prepares for preliminary trade discussions with China this weekend in Switzerland.

However, both Washington and Beijing appear to be keeping expectations in check. Trump’s rhetoric has remained combative, underscored by the recent appointment of a new U.S. envoy to Beijing. The U.S. President reiterated his administration's intention to limit tariff exemptions, stating explicitly that they are “not looking for so many exemptions.” This suggests that any progress made in the upcoming talks will likely be incremental at best, with neither side eager to compromise too quickly.

Across the Atlantic, the euro is dealing with its own challenges. The single currency has struggled under the weight of increasingly dovish expectations from the European Central Bank. Policymakers have been sounding more cautious about the Eurozone’s growth outlook, even as they maintain the official line that inflation is expected to sustainably reach the 2% target by year-end. Despite this confidence, markets are now actively pricing in the possibility of an interest rate cut as soon as the ECB’s June meeting. That growing policy divergence between the ECB and the Federal Reserve — the former leaning toward easing while the latter remains data-dependent and broadly steady — is exerting persistent downward pressure on EUR/USD.

Technical Analysis

From a technical standpoint, the euro’s decline is becoming more entrenched. The pair has broken below the key 1.1260 support level, a move that significantly weakens the short-term bullish structure and reinforces the prevailing bearish correction. This breach marks the breakdown of the most recent higher low at 1.1264, a level that had served as a crucial line of defense for euro bulls. The daily close below that threshold is widely viewed as a negative signal, confirming a shift in trend direction from bullish to bearish on the daily chart.

Further compounding the euro’s troubles is the pair’s position relative to its 50-day exponential moving average, which it remains firmly beneath. The Relative Strength Index is also indicating continued weakness. While the RSI is currently situated in oversold territory, the lack of any sustained rebound suggests that positive momentum is not building.

TRADE RECOMMENDATION

SELL EURUSD

ENTRY PRICE: 1.1260

STOP LOSS: 1.1400

TAKE PROFIT: 1.1000

Risk Warnings and Disclaimers

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Manuel

Economic

Central Bank

Summary:

This latest rejection coincides with a temporary easing of trade tensions, which could lend medium-term support to the U.S. dollar.

SELL EURUSD

EXP

EXPIRED

1.14200

Entry Price

1.09500

1.16200

1.16495 +0.00069 +0.06%

Pips

EXPIRED

1.09500

1.13296

Exit Price

1.14200

Entry Price

1.16200

The European Central Bank (ECB) appears firmly on course to deliver its eighth rate cut within a twelve-month period, marking its seventh consecutive reduction. This growing conviction among market participants reflects the belief that inflation in the euro area is gradually converging toward the ECB’s 2% target by the end of the year. In parallel, the possibility of further economic headwinds, especially due to tariffs imposed by U.S. President Donald Trump, has added to expectations that the central bank will continue loosening policy in the coming months to shield the fragile recovery.

In recent weeks, several ECB policymakers have spoken publicly in favor of maintaining an accommodative approach, noting that inflation remains vulnerable to downside risks. Their statements reveal a strong consensus within the Governing Council to act preemptively rather than reactively, as the eurozone continues to navigate both structural weaknesses and external shocks. Against this backdrop, market speculation has intensified, with many analysts now expecting the ECB to deliver additional stimulus sooner rather than later to prevent deflationary pressures from becoming entrenched.

Meanwhile, prospects for a near-term trade agreement between the United States and the European Union appear to have dimmed. Speaking during Tuesday’s European session, EU Trade Commissioner Maros Sefcovic emphasized that the bloc is actively strengthening its relationships with other trading partners—who collectively represent 87% of the EU’s exports—according to The Straits Times. When pressed about the status of U.S.-EU trade talks, Sefcovic reiterated the EU’s commitment to reaching a fair and balanced deal but pointed to Washington’s lack of meaningful engagement as a key obstacle to progress.

Across the Atlantic, President Trump on Thursday described what he called a major breakthrough in trade relations with the United Kingdom and suggested that tariffs on Chinese goods might be eased ahead of the upcoming round of high-level U.S.-China negotiations. At the same time, he renewed his criticism of Federal Reserve Chair Jerome Powell, highlighting once again the friction between the White House and the central bank over monetary policy direction.

Despite mounting political pressure, the Federal Reserve opted on Wednesday to leave interest rates unchanged for the third straight meeting. Citing growing economic uncertainty, the central bank maintained a cautious tone, pushing back against calls from the administration for more aggressive easing.

Fed Chair Jerome Powell, during his press conference, underscored the central bank’s data-dependent approach, noting that policymakers intend to proceed with patience as they monitor the effects of trade policy on inflation and employment. “There is no need to act hastily,” Powell said, pointing to the unpredictable nature of ongoing trade negotiations and their potential macroeconomic implications.

“We simply can’t forecast how this situation will evolve,” he acknowledged, while noting that the overall level of uncertainty remains unusually elevated. Powell reaffirmed that the Fed is prepared to respond as needed but stressed that the current stance remains appropriate given the available data.

The Federal Open Market Committee (FOMC) voted unanimously to keep the federal funds rate within its target range of 4.25% to 4.50%—a level last established in late 2024 following a full percentage point reduction during the previous autumn. In its post-meeting statement, the Fed conceded that economic uncertainty had “increased further,” even as the underlying pace of growth remains “solid,” albeit distorted by volatility in net export data during early 2025. Potential for a Deeper Pullback Builds After Triple Tap on Resistance_1

Potential for a Deeper Pullback Builds After Triple Tap on Resistance_1

Technical Analysis

EURUSD has recently tested the upper boundary of a rising resistance line for the third time, encountering renewed selling pressure at this level. This latest rejection coincides with a temporary easing of trade tensions, which could lend medium-term support to the U.S. dollar. If the local resistance around 1.1420 once again proves difficult to breach, the pair could be poised for a deeper pullback, with the next major support level situated near 1.0950.

The 100-period and 200-period moving averages are currently located at 1.0723 and 1.0791, respectively, and have shown a sideways trend since the beginning of the year. This technical behavior suggests that price could be magnetized back toward this consolidation zone. Adding to this bearish setup, the daily Relative Strength Index (RSI) recently reached 77, signaling clear overbought conditions and potentially attracting dollar buyers seeking to rebalance.

Notably, the 0.50 and 0.618 Fibonacci retracement levels lie just above these long-term moving averages, reinforcing the likelihood of a corrective move toward that zone. However, should EURUSD manage to post a new local high above current resistance, the bearish outlook would be invalidated, opening the door to a renewed upside extension.

Trading Recommendations

Trading direction: Sell

Entry price: 1.1420

Target price: 1.0950

Stop loss: 1.1620

Validity: May 21, 2025 15:00:00

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The EUR/JPY pair retreats from recent highs as traders assess central bank divergence, revived but fragile U.S.–China trade talks, and weak Japanese economic data. Market focus shifts to ECB’s Schnabel for forward guidance.

BUY EURJPY

Close Time

CLOSED

163.604

Entry Price

164.900

162.500

181.213 +0.340 +0.19%

88.3

Pips

Profit

162.500

164.487

Exit Price

163.604

Entry Price

164.900

The euro slipped against the Japanese yen on Friday, with the EUR/JPY pair trading around 163.45, down 0.20%, as risk sentiment cooled and market participants turned cautious ahead of a key speech by European Central Bank (ECB) policymaker Isabel Schnabel. The pullback comes after the pair briefly tested resistance at 163.94, only to reverse amid a convergence of geopolitical, monetary, and macroeconomic forces.

While the broader trend for the euro remains supported by the stark monetary policy divergence between the ECB and the Bank of Japan (BoJ), near-term jitters over global trade tensions and soft Japanese data have tempered the bullish momentum. Markets are recalibrating expectations as the euro faces conflicting cues: hawkish ECB rhetoric on one hand, and growing global uncertainty on the other.

A key driver of the broader risk mood this week has been the rekindled dialogue between the United States and China, with high-level trade negotiations set to take place in Switzerland this weekend. U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are scheduled to meet their Chinese counterparts—a development that initially boosted risk appetite and lent support to EUR/JPY's upside.

However, that optimism was quickly diluted after former President Donald Trump—now a leading candidate in the upcoming election—muddied the waters by proposing an 80% tariff on Chinese imports, a proposal that, while lower than the current effective tariff rate of 145%, injects fresh uncertainty into an already fraught U.S.–China trade relationship.

This tariff saber-rattling has pushed investors back into safe-haven assets like the Japanese yen, traditionally favored during times of heightened geopolitical uncertainty. Nonetheless, the yen’s gains have been modest, as its appeal continues to be undermined by the BoJ’s unwavering commitment to ultra-loose monetary policy.

Investor caution is also being driven by the upcoming speech by Isabel Schnabel, a known hawk on the ECB Governing Council, who is set to speak at the Hoover Institution’s Monetary Policy Conference. Traders are watching closely for clues about the ECB’s rate path, particularly as the market gears up for a possible 25 basis point rate cut in June.

Despite signs of a pivot, ECB officials have stressed that policy decisions remain data-dependent, and recent comments have suggested the central bank is not yet ready to declare victory over inflation. Any hawkish tone from Schnabel—especially against the backdrop of continued economic strength in parts of the euro area—could reignite euro bullishness and strengthen EUR/JPY in the medium term.

By contrast, the Bank of Japan remains staunchly dovish. Governor Kazuo Ueda and his team have shown no urgency to tighten policy further after their historic March rate hike. With inflation still tepid and domestic consumption weak, Japanese officials have repeatedly emphasized patience, reinforcing the euro’s relative advantage.

Friday’s Japanese data release offered little to bolster yen bulls. The Coincident Index, which tracks current economic conditions, declined to 116.0 from a revised 117.3, underscoring sluggish domestic momentum. Meanwhile, the Leading Economic Index came in at 107.7, a modest beat relative to expectations (107.5) but down from the previous reading of 108.2, suggesting a softening outlook for future activity.

The weak print aligns with the broader narrative of Japan’s economic malaise, keeping pressure on the BoJ to maintain its easing bias. Inflation, wage growth, and business investment all remain tepid, and without a credible uptick in price pressures, the central bank is likely to remain sidelined for now.

Technical Analysis

From a technical perspective, EUR/JPY recently broke above the 163.25 barrier, climbing to a high of 163.90, but failed to sustain gains, encountering resistance just shy of 164.00. The pair is now consolidating below 163.50, with intraday support seen near 163.00 and a more critical base at 162.65.

Should the Euro manage to defend this support zone and regain upside momentum, a bullish breakout toward 164.20 could be in play, with a potential retest of the key 164.90 resistance zone. However, failure to hold above 162.65 could signal a shift in short-term sentiment and expose the pair to deeper corrections.

Momentum indicators remain mixed, suggesting that while the broader trend remains bullish due to monetary policy divergence, the pair may continue to trade sideways in the near term as markets await policy clarity.

TRADE RECOMMENDATION

BUY EURJPY

ENTRY PRICE: 163.60

STOP LOSS: 162.50

TAKE PROFIT: 164.90

Risk Warnings and Disclaimers

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Eva Chen

Commodity

Economic

Summary:

WTI crude oil prices are hovering around $60.00 per barrel, with easing trade tensions providing an upside potential.

BUY WTI

Close Time

CLOSED

60.857

Entry Price

70.540

56.700

59.267 -0.542 -0.91%

176.6

Pips

Profit

56.700

62.623

Exit Price

60.857

Entry Price

70.540

Fundamentals

The resurgence of optimism surrounding global trade negotiations has bolstered oil prices, which are on track for a weekly gain of over 3%. The recent announcement of a trade agreement between the U.S. and the UK, the first such deal with a major trading partner since the imposition of broad tariffs by the Trump administration, has significantly eased trade tensions.

This development has not only enhanced investors' confidence but also provided a robust tailwind for crude oil prices.

Furthermore, China and the U.S., after a prolonged stalemate in the trade war, are set to commence trade negotiations in Switzerland this weekend. The primary objective of these talks is to reach a consensus on reducing the currently excessive tariffs, which have effectively imposed a de facto trade embargo on most goods. Given the increasing economic pressure on both sides, we anticipate that an agreement to lower tariffs to a more reasonable range will be reached in the near term.

Technical Analysis

WTI crude oil prices continued to climb on Friday, trading near $60.80 per barrel, following a nearly 4% increase in the previous trading session. The easing of trade tensions among major oil-consuming countries and the announcement of a "breakthrough" trade agreement between the UK and the U.S. have been the primary catalysts for the recent price surge.

Technically, WTI crude oil prices have broken through the descending triangle resistance that has been constraining their movement since early April. Currently, the commodity is trading above $60.04 per barrel, showing a bullish momentum after rebounding from recent lows. Meanwhile, the formation of a head-and-shoulders bottom pattern on the one-hour time frame further confirms that an upward trend may be taking shape.

From a moving average perspective, the MA100 has crossed below the MA200, which typically signals a bearish crossover. However, the current price is approaching a dynamic turning point of the MA100, and a breakout to the upside could be an early bullish signal.

The stochastic oscillator is approaching the overbought area, indicating that bullish momentum is strengthening. The indicator has been on an upward trajectory since early May, confirming the recent upward trend in prices. However, as it nears the 80 level, it may signal that the market's upward momentum could weaken, and traders should remain cautious.

The relative strength index (RSI) is also on an upward trend and still has room to rise before reaching the overbought area, indicating that the upward momentum may continue in the short term. The RSI is currently hovering around 50, indicating a balance between buying and selling pressures.

If crude oil prices successfully break through and hold above the top of the descending triangle, we may see oil prices rise towards the resistance level of $64.00 per barrel. Conversely, if the breakout fails, it could trigger a pullback to test the support level of $55.27 per barrel.

Despite OPEC+'s decision to increase oil production by 411,000 b/d in June, investors should still keep a close eye on geopolitical and trade dynamics, as positive news could revitalize the commodity's stronger demand outlook.

Trading Recommendations

Trading Direction: Long

Entry Price: 60.80

Target Price: 70.54

Stop Loss: 56.70

Valid Until: May 24, 2025, 23:55:00

Support: 59.83/57.15/56.19

Resistance: 61.83/63.47/64.71

Risk Warnings and Disclaimers

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Alan

Forex

Summary:

Although the UK and the US reached a trade agreement yesterday, it came at the cost of unilateral concessions by the UK.

SELL GBPUSD

Close Time

CLOSED

1.32570

Entry Price

1.27600

1.34500

1.33152 -0.00160 -0.12%

193.0

Pips

Loss

1.27600

1.34510

Exit Price

1.32570

Entry Price

1.34500

Fundamental

Yesterday, the UK and the US reached a trade agreement, but it was a unilateral concession by the UK.

The newly signed UK-US trade agreement, while superficially easing tariff tensions, contains hidden risks for the pound (GBP). The UK agreed to slash tariffs on US agricultural imports from 5.1% to 1.8%, while the US will only apply a 10% tariff to the first 100,000 UK car exports (maintaining 25% beyond this quota) and eliminate steel/aluminum tariffs. Though this temporarily eases export pressures, the agreement fails to address tariff barriers on UK core industries. Additionally, the UK's commitment to purchase $10 billion worth of Boeing aircraft exacerbates trade deficit risks. Threats of future US tariffs on UK pharmaceuticals further dampen market sentiment.

Meanwhile, the Bank of England (BoE) cut rates by 25bps to 4.25% yesterday—its fourth easing since August 2024. While the BoE emphasized a "gradual and prudent" approach, markets now price in 100bps of cumulative cuts in 2024 (potentially lowering rates to 3.5%). Contrasting this, the Fed's hawkish stance (with 10-year Treasury yields holding at 4.274%) widens the interest rate differential, driving arbitrage flows into the USD and amplifying GBP depreciation pressures.

Technical Analysis

Neckline Breach Signals Potential Downside_1

Based on the 4-hour chart, GBPUSD has formed a head-and-shoulders pattern, with a confirmed breach of the neckline at 1.3250, signaling activated downside potential.

Current price action shows GBPUSD rebounding from support at the 144-period moving average (MA144) to test the validity of the pattern. A weakening signal near 1.3250 (the neckline-turned-resistance) would confirm the bearish setup, opening the door for further declines. Even if prices rebound above the neckline but stall below the left shoulder at 1.3423, the bearish outlook remains intact.

Selling at highs is suggested.