The GBP/USD pair moved higher at the start of a new week and traded just below the 1.3100 level during the Asian session (4/14), within striking distance of Friday's swing high. Moreover, the bearish sentiment surrounding the US Dollar (USD) suggests that the path of least resistance for spot prices remains to the upside.
The initial market reaction to US President Donald Trump's decision last week to pause all-encompassing tariffs for 90 days turned out to be short-lived amid growing fears of a US recession amid the escalating US-China trade war. China's 84% tariffs on US goods went into effect on Thursday, while Trump raised duties on Chinese imports to an unprecedented 145%. Given that the US still imports some hard-to-substitute materials from China, the developments undermined confidence in the American economy. This, in turn, dragged the USD Index (DXY), which tracks the greenback against a basket of currencies, to its lowest level since April 2022 and continued to act as a tailwind for the GBP/USD pair.
Meanwhile, data released last week showed that the US Consumer Price Index (CPI) contracted by 0.1% in March while the core CPI rose by +2.8% year-on-year, below consensus expectations. This comes on top of concerns about the potential economic impact of an all-out trade war and further raised bets that the Federal Reserve (Fed) will soon resume its interest rate cutting cycle. In fact, markets are now pricing in a 90 basis point rate cut by the end of this year. In contrast, investors see a slightly less likely Bank of England (BoE) to cut rates next month. This, along with signs of stability in the equity markets, turned out to be another factor that undermined the safe-haven dollar and extended some support to the GBP/USD pair.
The supportive fundamental backdrop validates the near-term positive outlook for spot prices, though investors seemed reluctant to place any aggressive bets and preferred to wait for the key UK macro data releases. The crucial monthly jobs report is due on Tuesday, followed by the latest consumer inflation figures on Wednesday. Apart from this, investors, this week also face the release of US monthly Retail Sales data and a scheduled speech by Fed Chair Jerome Powell, which will play an important role in influencing the USD price dynamics. This, in turn, should provide some meaningful impetus to the GBP/USD pair during the latter part of the week. (Newsmaker23)
Source: FXstreet
