Insights 
VT 
US President Trump is set to meet with UK Prime Minister Starmer this evening, hinting at the possibility of approving a trade deal between the two countries. Discussions will delve into refining the terms of the deal.
The GBPUSD exchange rate has declined, driven by weaker-than-expected UK retail sales, adding pressure to its downward trend. The pair previously peaked near the resistance level but has since fallen sharply. The high on Wednesday/Thursday was 1.3586. It then tested the 100-hour moving average before falling further below the 200-hour moving average at 1.3464.
Bearish Momentum
The currency pair’s bearish momentum continues. Sellers will be cautious if the price surpasses 1.3475. Staying below this level supports a bearish stance. Should it rise above, the bearish outlook may weaken. For continued decline, the pair would need to break below 1.3414, aiming for the monthly low and the bigger swing region between 1.33607 and 1.33784.
Macroeconomic factors include Trump’s remarks on the dollar, saying he doesn’t favour a weaker dollar but admits it complicates exports. These statements could influence USD sentiment amid inflation worries.
We believe the bearish pressure on the pound is justified, especially after the latest data. The Office for National Statistics confirmed UK retail sales fell by a sharp 2.3% in April, far worse than the 0.4% drop that was expected. This confirms the fundamental weakness Michalowski highlighted and supports a continued move lower.
Interest Rate Cuts
The Bank of England is now widely expected to cut interest rates by August, ahead of the US Federal Reserve. This policy divergence historically weakens the pound against the dollar, as we saw when the pair fell dramatically during the 2021-2022 period when the Fed was more aggressive. For traders, this growing interest rate gap is a powerful reason to favor the dollar.
The potential trade deal mentioned by the former President is likely just political noise for now and should not distract from the core trend. His comments on the strong dollar, however, are more relevant as the US economy shows resilience. The recent US Consumer Price Index reading of 3.4% shows inflation remains persistent, giving the Fed reason to keep rates high and the dollar supported.
Derivative traders should consider buying put options or establishing short futures positions, using the 200-hour moving average around 1.3464 as a key risk level. Recent data from the Commodity Futures Trading Commission shows that large speculators have been reducing their net long positions on the pound, suggesting conviction in the bearish outlook is growing. A break below the 1.3414 level mentioned in the analysis would be our signal to add to short positions, targeting the swing area near 1.3360.
