The GBP/USD forecast suggests a pause in the dollar’s recent relief rally, as concerns about economic growth begin to overshadow temporary optimism. While the dollar rose in the previous session, following reassurances from President Trump that he had no intention of firing Federal Reserve Chair Jerome Powell, the overall sentiment remains cautious due to ongoing economic slowdowns in both the US and the UK.
Dollar’s Brief Rebound
In the previous session, the US dollar gained strength as President Trump calmed markets by retracting his earlier threats to fire Fed Chair Powell. Trump had been vocal in criticizing Powell for not cutting interest rates aggressively enough to support the US economy, which is experiencing signs of slowing growth. However, following Trump’s reassurance, the market sentiment around the dollar improved, offering a temporary reprieve to the greenback.
Additionally, there were signs of progress on the US-China trade front. The White House hinted at the possibility of a trade deal aimed at reducing tariffs on Chinese goods, which helped lift investor sentiment. An agreement that eases trade tensions would reduce the uncertainty hanging over the US economy and improve market confidence.
Focus Shifts Back to Economic Slowdown
Despite the dollar’s brief rally, market participants are increasingly turning their attention to concerns about a potential US economic slowdown. Business activity in the US services sector showed a decline, which overshadowed a slight improvement in manufacturing. This development highlights the ongoing impact of tariffs and trade uncertainty on business sentiment. As a result, the dollar’s strength may be short-lived as the market reassesses the sustainability of economic growth.
Similarly, in the UK, business activity data painted a mixed picture. Service sector activity contracted, while manufacturing remained stable. The UK’s economic outlook is also affected by Brexit-related uncertainties and the ongoing impact of global trade tensions.
GBP/USD Outlook
With the US economic outlook showing signs of weakness and global growth concerns weighing on investor sentiment, the GBP/USD pair may see further volatility in the near term. While the dollar may have gained some ground recently, the broader economic slowdown in both the US and the UK could limit further gains.
The focus in the near future will likely shift to economic data releases, particularly business activity indicators and trade developments. Should concerns about the US economy persist, or if the trade deal with China stalls, the dollar may struggle to maintain its recent strength, providing some support for the British pound.
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