Gold Falls as Trade Deal Hopes Dent Safe-Haven Demand

Economic

Summary:

Gold prices slipped below $3,200 during Friday's European session as optimism surrounding a potential US-China trade breakthrough diminished safe-haven appeal.

SELL XAUUSD

Close Time

CLOSED

3206.00

Entry Price

3120.00

3280.00

4299.39 +20.10 +0.47%

308.9

Pips

Profit

3120.00

3175.11

Exit Price

3206.00

Entry Price

3280.00

Gold prices came under renewed selling pressure on Friday, paring back much of the gains from the previous session’s recovery, as investor sentiment turned optimistic over global trade negotiations. The precious metal slid back below the $3,200 mark during early European trading, extending an intraday downtrend amid waning demand for traditional safe-haven assets.

At the heart of the market’s shift is progress on a tentative US-China trade truce. Both economic superpowers have agreed to sharply reduce tariffs and initiate a 90-day window aimed at finalizing a more comprehensive deal. Comments from US President Donald Trump further buoyed investor optimism after he hinted at productive talks with other key trading partners, including India, Japan, and South Korea. This optimism, however, has dulled demand for gold, which typically benefits from market uncertainty and geopolitical risk.

Even so, the broader macroeconomic and geopolitical landscape remains far from calm. Negotiators from Russia and Ukraine are holding peace talks in Istanbul — the first direct dialogue in three years — alongside a US delegation. But the absence of Russian President Vladimir Putin has already curbed expectations of any meaningful breakthrough. Simultaneously, Israel's military campaign in Gaza has intensified, with Thursday alone witnessing the deaths of at least 143 Palestinians in what is now one of the deadliest episodes in the conflict this year.

Such geopolitical tensions would typically bolster gold demand. However, Friday’s market action suggests that risk appetite, bolstered by trade optimism and slightly better-than-feared retail data, has temporarily overshadowed these global concerns.

Meanwhile, softening US inflation and consumer data released this week have reignited expectations for a series of interest rate cuts by the Federal Reserve. On Thursday, the US Producer Price Index (PPI) for final demand unexpectedly dropped 0.5% in April — its steepest decline since 2023 — building on Tuesday’s subdued Consumer Price Index (CPI) data. The CPI rose at an annual pace of just 2.2%, its slowest since February 2021. These trends point to easing price pressures and may offer the Fed more room to pivot toward a more accommodative monetary policy.

The Department of Commerce also reported a slowdown in consumer spending, with retail sales rising just 0.1% in April — a sharp moderation from March’s upwardly revised 1.7% gain. While this further supports a dovish Fed outlook, it also raises concerns about the broader growth trajectory of the US economy, reinforcing forecasts of a sluggish expansion in coming quarters.

Despite the supportive macroeconomic backdrop for gold — especially a weakening US Dollar and declining Treasury yields — the metal has struggled to build upward momentum. The US Dollar has remained under pressure for a second straight session, reflecting the market’s conviction that the Fed may soon cut rates. Yet gold has not capitalized on this, highlighting the metal's current vulnerability to broader risk sentiment shifts.

Technical Analysis

From a technical standpoint, gold remains firmly ensnared in a bearish correction phase. The price continues to trade below the critical $3,260 resistance level and its 50-day Exponential Moving Average (EMA50), reinforcing a broader downtrend bias. The failure to hold above $3,200 opens the door for a retest of the crucial $3,120 support zone — the level from which Thursday’s recovery initially sprung.

Analysts also note the development of a negative divergence on the Relative Strength Index (RSI), suggesting waning bullish momentum despite prior price increases. This bearish RSI signal, coupled with the persistent price rejection at the upper boundary of a descending channel, adds to the probability of further declines in the near term.

As long as gold remains below the $3,260 resistance level, technical indicators point toward a continued bearish trend. A confirmed break below $3,200 could trigger an accelerated decline toward $3,120, with intermediate support expected around $3,180. Only a sustained rebound above $3,260 would negate this bearish setup and shift the short-term bias.

TRADE RECOMMENDATION

SELL GOLD

ENTRY PRICE: 3206

STOP LOSS: 3280

TAKE PROFIT: 3120

Risk Warnings and Disclaimers

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Warren Takunda

Commodity

Summary:

WTI oil prices declined for the third straight session to $61.10, pressured by rising inventories and Iran deal speculation.

SELL WTI

Close Time

CLOSED

61.000

Entry Price

57.000

63.500

57.233 -0.408 -0.71%

250.0

Pips

Loss

57.000

63.508

Exit Price

61.000

Entry Price

63.500

West Texas Intermediate (WTI) crude oil extended its losing streak into a third consecutive session on Friday, slipping to around $61.10 a barrel in early European trade. Despite the persistent decline, prices are still on course for a modest weekly gain, as rekindled optimism surrounding US-China trade relations provides a counterweight to intensifying global supply concerns.

The interplay between bullish geopolitical developments and bearish supply fundamentals has left oil traders in a state of flux. While headlines around the long-embattled US-China trade dynamic helped lift sentiment earlier in the week, the crude market's upside potential continues to be capped by the specter of a resurgent Iranian oil supply and rising global inventories.

Market sentiment received a boost earlier this week after the United States and China—the world’s two largest oil consumers—announced a preliminary breakthrough in trade talks. According to official statements, the US has agreed to cut tariffs on Chinese imports from a punitive 145% to 30%. In return, China will lower its tariffs on American goods from 125% to 10%.

This bilateral gesture of economic de-escalation has injected a dose of confidence into global markets, raising hopes that trade flows and industrial activity will rebound—potentially reviving demand for crude oil, which has remained subdued in recent quarters amid fears of a global slowdown.

“This deal has the potential to restore investor confidence in the global growth story, which had been deeply eroded by prolonged tariff tensions,” noted Helima Croft, head of global commodity strategy at RBC Capital Markets. “Oil, being the most demand-sensitive asset in the macro complex, has responded accordingly—though gains remain tentative.”

However, any relief rally in oil remains undercut by speculation that a new US-Iran nuclear agreement could soon materialize, potentially ending years of sanctions on Tehran’s oil exports. President Donald Trump hinted earlier in the week that negotiations were progressing and that Iran had “sort of” accepted the terms of a renewed framework.

While no formal agreement has been reached, and several contentious issues reportedly remain unresolved, the mere possibility of Iranian barrels re-entering the market has forced traders to reassess supply risks. According to ING analysts cited by Reuters, the successful implementation of a deal could allow Iran to ramp up its crude production by as much as 400,000 barrels per day, further exacerbating concerns of oversupply.

In addition to the Iran factor, the International Energy Agency (IEA) added fuel to bearish sentiment by revising its global supply forecast upwards by 380,000 barrels per day. The revision reflects stronger-than-expected output from Saudi Arabia and other members of the OPEC+ alliance, many of whom have been steadily easing their voluntary production curbs amid improved fiscal balances and competitive pressures.

Further weighing on the market was an unexpected rise in US crude stockpiles, as revealed by the latest Energy Information Administration (EIA) data. Inventories increased last week, defying analyst expectations of a drawdown, and signaling tepid domestic demand or increased refinery maintenance. This inventory build, coupled with looming additions from both sanctioned and unsanctioned producers, reinforces the notion that supply continues to outstrip demand.

Technical Analysis

From a technical perspective, the price of WTI crude appears to be approaching a critical resistance level. A horizontal ceiling around the $62.00 mark is likely to attract selling pressure. This zone has historically acted as a barrier, capping previous attempts at bullish breakouts. If the price fails to convincingly breach this level, a corrective move lower could be imminent. In that scenario, downside targets emerge around the $57.00 handle—marking a key support area where buyers have previously stepped in.

TRADE RECOMMENDATION

SELL WTI

ENTRY PRICE: 61.00

STOP LOSS: 63.50

TAKE PROFIT: 57.00

Risk Warnings and Disclaimers

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Manuel

Cryptocurrency

Summary:

A solid move above this level would reinforce the bullish setup and increase the probability of further gains.

BUY BTC-USDT

Close Time

CLOSED

103950.0

Entry Price

108000.0

100000.0

90084.6 -16.1 -0.02%

1781.2

Pips

Profit

100000.0

105731.2

Exit Price

103950.0

Entry Price

108000.0

During his appearance at the Consensus 2025 conference in Toronto, Eric Trump—son of former President Donald Trump—publicly voiced his support for Bitcoin, referring to it as “digital gold” and praising its role as a reliable store of value. Speaking on a well-attended panel, Trump described how his perception of cryptocurrencies has evolved over time. Although his career has traditionally revolved around real estate, he explained that recent political shifts have driven him to explore the crypto world more seriously.

On Tuesday, U.S.-listed spot Bitcoin ETFs experienced notable outflows totaling $96.14 million, with the bulk of the withdrawals coming from Fidelity’s FBTC and Hashdex’s DEFI funds, which recorded daily outflows of $22.9 million and $2.6 million, respectively, according to data from SoSoValue.

The remaining ETFs showed no activity in terms of flows, with no additional inflows or outflows. For BlackRock’s IBIT, the absence of movement ended a remarkable 20-session inflow streak during which the leading ETF had attracted over $5.2 billion.

Until May 9, Bitcoin ETFs had recorded four consecutive weeks of net inflows—setting a new record in 2025. Among them, IBIT had emerged as the top performer, even outpacing inflows into the largest gold ETF for the year.

As of Tuesday, the combined net inflows across all U.S. spot Bitcoin ETFs had reached $41 billion since their January 2024 debut. At the same time, assets under management (AUM) across these vehicles have surpassed $120 billion—a historic milestone for the industry.

Investor interest in Bitcoin ETFs is often seen as a proxy for broader market sentiment. While flows have recently stalled, macroeconomic factors are likely to remain a key influence on Bitcoin’s price direction in the near term, with other variables gradually coming into play.

JPMorgan Chase, one of the most influential global investment banks, recently suggested that Bitcoin may outperform gold in the second half of 2025. The bank attributes this to rising corporate demand and growing state-level adoption of Bitcoin as a treasury reserve asset in the U.S.

In a client note cited by The Block on Thursday, JPMorgan expressed a constructive outlook on Bitcoin (BTC), highlighting how institutional capital flows and a favorable macro backdrop are working in favor of the leading cryptocurrency.

Historically, gold has been the go-to hedge for investors during times of economic uncertainty. However, JPMorgan’s research suggests Bitcoin is rapidly emerging as a credible alternative.

Analyst Nikolaos Panigirtzoglou pointed out a notable shift in the "debasement trade"—a strategy where investors buy gold and Bitcoin to protect against the erosion of fiat currencies. While both assets benefited from this dynamic late last year, the trend has since diverged.

“From mid-February to mid-April, gold rose at Bitcoin’s expense,” Panigirtzoglou wrote. “But over the past three weeks, we’ve seen the opposite—Bitcoin has been climbing as gold gives up ground.” A New Bullish Leg Could Unfold If Bitcoin Breaks Above Key Resistance_1

A New Bullish Leg Could Unfold If Bitcoin Breaks Above Key Resistance_1

Technical Analysis

Bitcoin has recently found support above the 100- and 200-period moving averages on the 1-hour chart, currently located around 103,358 and 102,798, respectively. This zone could act as a launchpad for the next bullish impulse, especially as institutional adoption appears to be reigniting upward momentum from the $93,000 level. Furthermore, the support area near $101,000 has consistently held firm, helping to fuel upward movements from this region. If the price manages to hold above this support, we could see a renewed push toward the $107,000 resistance level.

The RSI currently sits near 56, indicating neutral momentum without signs of overbought conditions. This leaves room for additional upside if the price can decisively break above the $104,000 resistance level—a barrier that has capped recent rallies. A solid move above this level would reinforce the bullish setup and increase the probability of further gains. Conversely, a decisive break below the local support zone could trigger a deeper corrective phase in the short term.

Trading Recommendations

Trading direction: Buy

Entry price: 103810

Target price: 108000

Stop loss: 99000

Validity: May 26, 2025 15:00:00

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

EUR/USD has entered a corrective phase after reaching a local high of 1.1572 on April 21, since then, the pair has struggled to make new highs and instead formed a series of lower lows.

SELL EURUSD

Close Time

CLOSED

1.11857

Entry Price

1.09520

1.14000

1.17394 +0.00011 +0.01%

30.4

Pips

Profit

1.09520

1.11553

Exit Price

1.11857

Entry Price

1.14000

Retail sales data for April showed a modest increase of just 0.1%, beating market expectations but falling well short of the 1.5% rise seen in the previous month. This marks a potential turning point, indicating that U.S. consumers may be starting to pull back on spending. At the same time, the Producer Price Index (PPI) fell by 0.5% on a monthly basis, signaling further easing of inflationary pressures at the wholesale level. Together, these figures raise concerns about underlying demand and reinforce the view that inflation may be cooling more rapidly than previously anticipated.

Meanwhile, Federal Reserve Chair Jerome Powell, speaking alongside Fed strategist Thomas Laubach, reiterated the importance of reassessing the Fed’s communication framework on inflation and employment. The market response to Powell’s remarks was muted, with investors shifting their focus toward potential currency interventions in Asia and the deteriorating tone of negotiations between Russia and Ukraine.

Signs of cooling inflation were further confirmed by the latest Consumer Price Index (CPI) figures. Both headline and core CPI rose by just 0.2% in April, coming in below consensus forecasts of a 0.3% monthly increase. On an annual basis, core inflation—which excludes volatile food and energy prices—remained steady at 2.8%, showing little momentum toward renewed price acceleration.

This softer inflation print has once again drawn market attention to the Federal Reserve’s next moves. While a rate cut in the immediate term remains unlikely, the latest data has fueled speculation that policy easing may be on the horizon. According to the CME FedWatch tool, the probability of a rate cut at the June 18 meeting remains low at just 8.2%, but this rises to 38.6% for July and jumps to 77.1% for September—suggesting that investors expect easing to begin in the second half of the year.

Still, cautionary voices persist. Chicago Fed President Austan Goolsbee warned that even existing tariffs could continue to place upward pressure on prices. Analysts at Deutsche Bank added that any softening in U.S.-China trade tensions is unlikely to trigger a meaningful shift in the Fed’s current policy stance.

Across the Atlantic, European Central Bank (ECB) policymaker and Governor of the Bank of France François Villeroy de Galhau stated on Wednesday that protectionist policies announced by the Trump administration are likely to reignite inflation in the U.S., not in Europe—setting the stage for a potential ECB rate cut by summer. Looking ahead, the main driver for the euro remains the stalled trade negotiations between the European Union and the United States.

During European trading hours, German Finance Minister Lars Klingbeil addressed parliament, stating that the EU is fully prepared with countermeasures should the talks with Washington collapse. However, he emphasized that Europe’s priority remains reaching an agreement with the U.S. “We hope the negotiations yield a positive outcome,” Klingbeil said, adding, “We must respond to U.S. tariffs with unity and resolve.”

Meanwhile, revised Eurozone GDP data for the first quarter showed the economy expanding at a slightly slower pace of 0.3%, compared to the initial estimate and previous reading of 0.4%. On a year-over-year basis, growth held steady at 1.2%, in line with forecasts. Employment data also improved, with job growth rising 0.3% quarter-over-quarter from January to March, up from a preliminary reading of 0.1%. Correction May Sustain Bearish Momentum Toward Key Support_1

Correction May Sustain Bearish Momentum Toward Key Support_1

Technical Analysis

EUR/USD has entered a corrective phase after reaching a local high of 1.1572 on April 21. Since then, the pair has struggled to make new highs and instead formed a series of lower lows. Moreover, the price has closed decisively below the 100- and 200-period moving averages—currently positioned at 1.1294 and 1.1232, respectively—suggesting the correction could deepen further, with potential downside targets near the 1.0952 level.

The Relative Strength Index (RSI) has failed to break above the 56 mark. While this level is typically viewed as neutral, in the context of a corrective move, it has previously marked turning points for renewed selling pressure. Should this pattern hold, sellers may re-enter from this region. On the flip side, a new higher high would invalidate the current bearish setup and could fuel further upside momentum.

Trading Recommendations

Trading direction: Sell

Entry price: 1.1185

Target price: 1.0952

Stop loss: 1.1400

Validity: May 23, 2025 15:00:00

Risk Warnings and Disclaimers

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Eva Chen

Forex

Economic

Summary:

USDCAD has found buyers near the key support level of 1.3746. While there are signs of improving market sentiment, the path of least resistance remains downward.

SELL USDCAD

Close Time

CLOSED

1.39762

Entry Price

1.34720

1.41990

1.37700 0.00000 0.00%

207.9

Pips

Profit

1.34720

1.37683

Exit Price

1.39762

Entry Price

1.41990

Fundamentals

Since May 6, USDCAD has been on an upward trajectory, now having recovered to the key psychological level of 1.4000. Recently, with the conclusion of trade agreements and an overall rebound in market sentiment, the market has generally calmed, with volatility subsiding.

Thus far, May has been a challenging month for the Canadian dollar. Trade between Canada and the United States has not shown any signs of alleviating the tense situation between the two countries. The renegotiation of the United States-Mexico-Canada Agreement (USMCA) appears to be taking longer than other international trade agreements for both nations. Meanwhile, the US dollar has shown signs of recovery, though it still faces resistance ahead.

According to informed sources, US officials engaged in global trade negotiations have not attempted to include monetary policy commitments in the agreements.

Given the volatility of the US dollar and its lack of safe-haven appeal, asset managers should seek greater diversification in their foreign exchange reserves, especially considering the noticeable trend of exiting the US dollar in April.

Technical Analysis

The recent rebound in USDCAD is based on the key support level of 1.3746 not being breached. Subsequently, bulls successfully broke through the MA20, signaling a renewed short-term upside interest.

Momentum indicators have begun to rise, reinforcing the ongoing bullish momentum. However, for a genuine rebound to take place, bulls must decisively break through the near-term high of 1.4180. If achieved, the medium-term downtrend targeting the 1.3472 level would be invalidated.

It is important to note that the Relative Strength Index (RSI) is still hovering below the neutral 50 level, indicating that bulls have not yet fully taken control. Deeper pullbacks may find firmer support near the rising trendline from December 2023 at 1.3645. If the psychological level of 1.3600 is also breached, more aggressive selling could occur, heading towards the double-bottom area of 1.3472 from August to September.

Overall, USDCAD has found some bullish momentum in the short term, but unless it can decisively break through the key resistance of 1.4180, the rebound may be short-lived.

Trading Recommendations

Trading Direction: Sell

Entry Price: 1.4050

Target Price: 1.3472

Stop Loss: 1.4199

Valid Until: May 30, 2025, 23:55:00

Support: 1.3899/1.3845/1.3753

Resistance: 1.4019/1.4078/1.4180

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Traders' Opinions

Summary:

The New Zealand Dollar dipped as investor appetite soured despite Wellington’s NZ$190 million social investment fund initiative.

SELL NZDUSD

Close Time

CLOSED

0.58700

Entry Price

0.57400

0.59700

0.58040 -0.00044 -0.08%

100.0

Pips

Loss

0.57400

0.59702

Exit Price

0.58700

Entry Price

0.59700

The New Zealand Dollar (NZD) fell sharply on Thursday, succumbing to risk-off sentiment and a firmer US Dollar, even as the domestic government unveiled a targeted NZ$190 million ($112 million) social investment fund aimed at improving long-term social outcomes. While the initiative underscores a fiscally responsible and data-driven policy direction, it failed to offset the pressure stemming from global macroeconomic headwinds and the enduring strength of the Greenback, particularly following comments from Federal Reserve Chair Jerome Powell.

At the time of writing, NZD/USD was trading at 0.5870, down 0.43% on the day, marking a reversal from earlier week gains. The Kiwi’s retreat underscores the market’s preference for safety as a murky economic outlook in both the US and New Zealand clouds sentiment.

In a development that typically might favor risk currencies like the NZD, US inflation data came in cooler than expected. April’s Producer Price Index (PPI) rose just 0.1% month-on-month versus expectations of a 0.3% increase, while core PPI eased to 0.2% from the prior 0.3%. On the surface, this reinforced bets that the Fed may be nearing its pivot point in the tightening cycle, potentially paving the way for rate cuts later this year.

However, the market reaction was far from straightforward.

Offsetting the soft inflation print, Federal Reserve Chair Jerome Powell delivered a subtly hawkish message, acknowledging that the Fed may need to adapt its policy framework to accommodate persistent and more frequent supply shocks — a nod to the structural changes underway in the post-pandemic global economy. “The framework needs to be robust to many circumstances, including a world where supply shocks may be more frequent and persistent,” Powell stated in remarks reported by Reuters.

His comments, while not overtly dovish, signaled a Federal Reserve still cautious about loosening policy too soon. This nuanced tone, combined with weaker-than-expected US retail sales figures (flat in April vs. 0.4% forecast), underpinned modest support for the US Dollar. Market participants interpreted Powell’s stance as an affirmation that the Fed is in no rush to ease, especially with inflation expectations still delicately balanced.

On the home front, the New Zealand government’s pre-budget announcement of a NZ$190 million social investment fund was met with a muted market response. Finance Minister Nicola Willis emphasized that the initiative aims to create “smarter, earlier” interventions to improve outcomes for vulnerable communities — a signal of Wellington’s continued commitment to data-led governance and fiscal prudence.

“It’s about government investing earlier, smarter, and with much more transparent measurement of the impact interventions are having,” said Willis.

Despite the program’s social merit and long-term focus, currency traders were unmoved, as the short-term economic outlook remains dominated by global factors, including China’s faltering recovery and uncertainty over the Reserve Bank of New Zealand’s (RBNZ) policy trajectory. Investors are awaiting concrete signs of domestic economic resilience before pricing in any substantial upside for the Kiwi.

Traders are now turning their attention to a pair of crucial domestic data points that could influence the NZD's next directional bias. Thursday evening’s release of the Business NZ Performance of Manufacturing Index (PMI), last seen at 53.2, will be scrutinized for signs of whether New Zealand’s industrial momentum is holding up. A soft reading could further dampen sentiment toward the Kiwi.

More critical, perhaps, is Friday’s RBNZ two-year inflation expectations survey. Previously at 2.06%, an uptick could reignite market expectations for prolonged RBNZ hawkishness — a possible support pillar for NZD. However, if expectations ease, it would reinforce dovish bets and increase downside risk.

Technical Analysis

From a technical perspective, NZD/USD has surrendered gains from earlier this week, falling back below the psychological 0.5900 threshold. Price action is struggling to maintain traction above the 23.6% Fibonacci retracement at 0.5900 and 78.6% Fibonacci extension at 0.5930. This area now acts as immediate resistance.

If downside momentum persists, the next key support lies around 0.5820 (38.2% Fibonacci retracement), with further weakness exposing 0.5740–0.5760, a zone defined by the 78.6% retracement and full Fibonacci extension levels.

Still, the decline could prove corrective rather than impulsive. Should NZD/USD hold above the weekly low of 0.5847 and manage to reclaim the 0.5900–0.5930 region, bulls may target a retest of the monthly high at 0.6023. A breakout beyond the April peak at 0.6029 and the November high at 0.6038 would clear the way toward 0.6070 — a key Fibonacci extension zone.

TRADE RECOMMENDATION

SELL NZDUSD

ENTYR PRICE: 0.5870

STOP LOSS: 0.5970

TAKKE PROFIT: 0.5740

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The Pound rose on strong UK GDP data, while weaker manufacturing figures were overlooked. Markets await Fed Chair Powell’s speech for cues on U.S. interest rates as the Dollar softens.

BUY GBPUSD

Close Time

CLOSED

1.32801

Entry Price

1.35000

1.32000

1.33707 -0.00148 -0.11%

34.4

Pips

Profit

1.32000

1.33145

Exit Price

1.32801

Entry Price

1.35000

The Pound Sterling surged on Thursday, climbing toward the 1.3300 mark against the US Dollar during European trading, buoyed by stronger-than-expected UK GDP data and broader weakness in the greenback ahead of a closely watched speech by Federal Reserve Chair Jerome Powell.

Sterling's rebound comes despite signs of industrial weakness, as investors weigh robust economic expansion in Britain against a backdrop of monetary policy uncertainty in the United States, where the Federal Reserve is increasingly seen as nearing the peak of its tightening cycle.

The Office for National Statistics (ONS) reported that the United Kingdom's economy expanded by 0.7% in the first quarter of 2025, exceeding consensus forecasts of 0.6%. This marks a sharp rebound from the previous quarter, when GDP growth was stagnant, and signals growing resilience in the face of elevated interest rates and inflation pressures.

On an annual basis, UK GDP rose 1.3%, marginally ahead of expectations (1.2%) though slightly slower than the 1.5% pace recorded in Q4 2024. The monthly breakdown showed that GDP increased by 0.2% in March, outperforming economists' expectations for flat growth. The surprise upside in GDP data has added fresh momentum to the Pound, as it implies that the Bank of England (BoE) may hold off on any immediate policy easing.

BoE Monetary Policy Committee member Catherine Mann reinforced that message earlier this week. Speaking to CNBC, Mann said monetary policy should remain restrictive due to persistent inflation risks and a still-resilient labor market. Despite recent softness in job growth, Mann emphasized that the market is undergoing a “non-linear adjustment,” not a dramatic slowdown, and warned against loosening policy prematurely.

However, the UK’s growth narrative isn’t without blemish. Manufacturing and Industrial Production contracted more than expected in March, with month-on-month figures showing a decline of 0.8% and 0.7%, respectively. Both indicators undershot the consensus forecast for a 0.5% contraction, suggesting that while consumer and service sectors are holding up, the industrial side remains under pressure—likely a consequence of persistent supply-side constraints and trade uncertainty.

Still, the broader macro picture, bolstered by strong GDP and a resilient services sector, is helping the Pound fend off downside risks. Markets are recalibrating expectations for the BoE’s interest rate path, which now appears increasingly tilted toward a prolonged pause rather than an imminent rate cut.

Meanwhile, in the U.S., traders are closely watching Fed Chair Jerome Powell’s upcoming remarks for any indication of a shift in tone following this week’s softer-than-expected Consumer Price Index (CPI) report. April CPI data showed inflation cooling more than anticipated, adding to speculation that the Fed might pivot to rate cuts later in the year, even as officials maintain a hawkish front.

Fed Vice Chair Philip Jefferson acknowledged the softer CPI numbers in remarks on Wednesday, describing the Fed’s current policy stance as “moderately restrictive.” However, he warned of looming uncertainties tied to new economic policies enacted by President Trump’s administration—including the impact of recently imposed tariffs. “If the increases in tariffs announced so far are sustained, they are likely to interrupt progress on disinflation and generate at least a temporary rise in inflation,” Jefferson cautioned.

According to the CME FedWatch Tool, markets now largely rule out a rate cut before the September meeting. Nonetheless, two 25 basis-point cuts are still priced in for 2025, contingent on continued disinflation and labor market moderation

Upcoming U.S. economic releases may sway market sentiment further. April’s Producer Price Index (PPI) is expected to show a slowdown in price pressures, with forecasts pointing to a 2.5% year-on-year rise in headline PPI, down from 2.7% in March. Core PPI, which strips out food and energy, is also projected to decelerate to 3.1% from 3.3%.

In tandem, retail sales—a key gauge of consumer spending—are projected to be flat in April, following a robust 1.5% jump in March. A soft retail print would likely reinforce the view that the U.S. economy is cooling, giving further impetus to the Fed doves.

Adding to the risk-on sentiment is the temporary truce between the U.S. and China. The two countries recently agreed to a 90-day pause on tariff escalation, cutting some levies by as much as 115% and pledging further negotiations. The reprieve, though fragile, has alleviated market fears of an imminent escalation in the trade conflict, offering breathing room for equities and risk currencies alike.

Technical Analysis

From a technical standpoint, the GBP/USD pair has reclaimed bullish momentum, trading back within a range previously capped between 1.32325 and 1.34155. After breaking below the 1.32325 mark, the pair staged a convincing recovery with a structure flip, signaling potential for further upside.

Should price action continue to hold above this range and confirm a clean retest, traders may target a revisit of the 1.34155 zone. A successful breach could pave the way for fresh yearly highs. For now, bulls are eyeing a 1:3 risk-reward long setup, anticipating renewed buying interest amid supportive macro tailwinds.

TRADE RECOMMENDATION

BUY GBPUSD

ENTRY PRICE: 1.3280

STOP LOSS: 1.3200

TAKE PROFIT: 1.3500

Risk Warnings and Disclaimers

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