01/02/26

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The British Pound has recently surged to its highest levels in four years, surpassing 1.3850 against the US Dollar amid a broad weakening of the greenback. This rally reflects sustained US dollar declines driven by geopolitical tensions, domestic economic concerns, and policy uncertainties. The recent deterioration in investor confidence has been exacerbated by US President Donald Trump’s unpredictable international stance, his confrontational trade rhetoric, and comments suggesting a potential 100% tariff on Canada if it proceeds with trade deals involving China. Alongside geopolitical risks, weaker US economic indicators, including the Conference Board Consumer Confidence index, which declined to its lowest point since mid-2011, have further undermined the USD.

In the foreign exchange markets, the decline of the dollar reached a four-year low against six major currencies, amid ongoing geopolitical tensions and domestic political developments. Market sentiment temporarily stabilized following the Federal Reserve’s decision to hold interest rates steady, with chair Jerome Powell highlighting the economy’s robustness and signaling a less dovish stance. This shift helped curb the USD’s decline, providing a lift in the short term. Additionally, comments from US Treasury officials reaffirming the country’s commitment to a strong dollar policy eased concerns among currency traders.

Looking ahead, the UK faces a pivotal week ahead, marked by the Bank of England’s policy announcement scheduled for ‘Super Thursday’. Investors anticipate that the BoE’s decision on interest rates and subsequent statements by Governor Andrew Bailey will provide critical insights into the central bank’s outlook. The market also remains attentive to forthcoming US employment data, including Nonfarm Payrolls and the Unemployment Rate, which are likely to influence expectations regarding future Federal Reserve policy moves. The upcoming economic indicators, including manufacturing and service sector data, will further shape market sentiment and currency trajectories.

Technical analysis suggests a continued bullish bias for the GBP/USD pair. The recent formation of a Golden Cross, with the 50-day moving average crossing above the 200-day, supports the outlook for further gains. The pair’s momentum remains firm, bolstered by the relative strength index approaching overbought levels. Support levels are identified around 1.3533, with the potential for short-term corrections before an extended upside trend resumes. Overall, the combination of technical signals and fundamental developments indicates a cautiously optimistic outlook for the Pound against the US Dollar.