Inflation Surges! GBP/USD Returns to an Uptrend

Summary:

Owing to significant uncertainty regarding the conflict's duration and its economic shock to the UK, market participants have pared back expectations for interest rate increases this year.

BUY GBPUSD

EXP

TRADING

1.35666

Entry Price

1.40000

1.32000

1.35347 -0.00371 -0.27%

0.0

Pips

Flat

1.32000

Exit Price

1.35666

Entry Price

1.40000

Fundamentals

Last Thursday, beneath the surface of the Bank of England's decision to maintain interest rates, hawkish sentiment intensified significantly. In contrast to the unanimous 9-0 vote in March, the latest tally shifted to 8-1, with Chief Economist Huw Pill casting a lone vote for a 25-basis-point hike, signaling an expansion of the hawkish camp. The meeting minutes explicitly revealed that several members who voted for a hold indicated the threshold for future rate hikes has been lowered substantially. Additionally, the Deputy Governor and external members collectively warned that sustained high energy prices would force policy tightening. This stance shattered the market's inertia regarding a "wait-and-see, dovish" BoE, triggering a concentrated surge in bullish sentiment for Sterling.

The Federal Reserve's monetary policy statement also revealed deep internal divisions. The market has realized that the Fed's policy consensus has been shattered, leading to a sharp rise in uncertainty over its future path. An analysis from UBS Wealth Management noted that these two-way splits within the Fed mean the central bank is caught in a policy dilemma—neither able to firmly maintain high rates to combat inflation nor move to initiate a rate-cut cycle. This ambiguous policy stance has directly eroded the "certainty premium" of U.S. assets, serving as the core trigger for the dollar's weakness.

On the geopolitical front, on the evening of the 2nd (ET), President Trump stated in an interview at a Florida airport that the U.S. does not rule out the possibility of resuming airstrikes against Iran. He later posted on social media that while he would soon review Iran's latest proposal, he found it "unimaginable" that the plan would be "acceptable," warning that Iran "has not yet paid a high enough price." Earlier that day, before boarding Air Force One, Trump also disclosed that he would clarify the Iranian proposal later. According to Iranian sources, Tehran has delivered a 14-point proposal to Washington via Pakistan in response to the 9-point proposal previously put forward by the U.S.

Technical Analysis

On the daily chart, the Bollinger Bands are opening upward and the Moving Averages (MA) are diverging higher, indicating that the overall uptrend remains intact. The MACD has formed a "Kiss of the Angel" (a bullish continuation pattern), and while the bullish momentum has slightly weakened, it suggests that prices will resume their climb after a brief pullback. The RSI is at 60, showing that investors are predominantly in a buying mode.

On the 4-hour chart, the Bollinger Bands are expanding upward with the MAs fanning out in a bullish alignment. The MACD fast and slow lines continue to trend above the zero line. The RSI stands at 59, reflecting optimistic market sentiment."Overall, the technical indicators remain bullish. Strategy: Buy on dips."

Inflation Surges! GBP/USD Returns to an Uptrend_1

Inflation Surges! GBP/USD Returns to an Uptrend_2

Trading Recommendations

Direction:Buy

Entry Price:1.356

Target Price:1.4

Stop Loss:1.32

Support Levels:1.34, 1.33, 1.3

Resistance Levels:1.37, 1.38, 1.41

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Inflation Surges! GBP/USD Returns to an Uptrend

Risk Disclosure