GBP/USD Momentum Maintained
GBP/USD has been gaining momentum since April 8, reaching around 1.3280 during the Friday Asian session. The pair benefits from a weaker US Dollar due to concerns about the economic effects of tariffs on the US.
Market attention is on US trade talk developments, though trading is expected to be low due to the Good Friday holiday. Despite hawkish comments from Federal Reserve Chair Jerome Powell, the CME FedWatch Tool indicates traders anticipate about 86 basis points of rate cuts by 2025.
The Pound remains steady against the Dollar after US data showed a solid labour market but mixed housing figures. GBP/USD is around 1.3250, a 0.11% increase, after unemployment claims fell to 215K from 224K, against forecasts of 225K.
The Pound shows stability against G-10 currencies except the Swedish Krona and Norwegian Krone. There are no domestic data releases or central bank events influencing the market. However, potential impacts from the European Central Bank cannot be ignored, with risks leaning towards gains from a long-term view.
Drivers Behind Recent GBP/USD Movements
The recent appreciation in GBP/USD, which began properly gaining pace around the second week of April, represents a continuation of a broader tilt towards Sterling in response to a declining US Dollar. What’s really driving this downtrend in the Dollar for now are market nerves about how escalating tariffs may slow economic activity in the United States. That concern sits in contrast with the relatively calm stance on this side of the Atlantic, making the Pound appear more stable by comparison.
The pair rallied to near 1.3280 during the Asian hours on Friday, though trading volumes were mostly muted due to the Good Friday holiday. Volume aside, it would be misguided to dismiss the current traction in GBP/USD as shallow. When looking beyond the holiday-related slowdown, the underlying catalysts suggest there’s weight behind the move. Powell offered relatively firm remarks recently, but the bond market’s read, as highlighted by the CME FedWatch Tool, indicates that traders are still building in rate reductions — somewhere in the range of 86 basis points through 2025. So while the rhetoric may sound firm, pricing tells a softer story.
Labour data from the US temporarily bolstered sentiment, surprisingly lowering jobless claims to 215,000 — sharper than consensus had expected. Yet, this was offset by uneven housing figures, which, while not alarming, have injected another note of hesitation into the US economy’s outlook. When global uncertainty picks up — whether in trade or policy expectations — we have seen this pair respond quickly to diverging rate paths.
GBP Holds Strength Against Most G-10 Currencies
In the meantime, the Pound is not easily shaken. Against most of the other G-10 currencies, it held firm, save for losses to the Nordic currencies. That strength is interesting, especially given the absence of fresh local drivers out of the UK – no key figures released, no milestone from the Bank of England. If anything, it underlines the extent to which near-term movements are more US-driven than not.
What we do need to keep watching, though, is Frankfurt’s next signal. While there’s no direct impact yet from the European Central Bank, any surprise hawkish notes could tilt sentiment quickly. For now, risks appear tilted slightly in favour of the Pound making further progress, especially when viewed over the longer horizon.
Given this positioning, we should remain alert during any retracements. Short-term dips could be opportunities for re-entry, especially if they coincide with renewed Fed dovish pricing or blips in US macro data. The current rhythm suggests there’s more room to play with levels above 1.3250 if current variables hold steady.
Chartwise, momentum indicators favour continuation — although recent gains could lead to brief consolidations. Unless the Dollar finds a firm footing soon, perhaps via trade breakthroughs or firming inflation readings, it’s hard to argue for sustained downward pressure on the Pound from here.
Spreads in the options markets have also slightly shifted in tandem with the spot, suggesting some firms are beginning to reflect this upside bias in their volatility pricing. That doesn’t mean everyone’s leaning one way, but it adds to the impression that directional confidence is improving.
From our perspective, watching the short end of the yield curves, particularly in the US, could prove instructive. If they continue to flatten with expectations of future cuts holding, the upward grind in GBP/USD should remain intact. Policy divergence, even if subtly expressed, remains one of the more reliable themes to trade in the absence of major shocks.
