Sat, Feb 08, 2025

GBPUSD is moving in a downtrend channel and the market has reached the lower high area of the channel

#GBPUSD Analysis Video

The British Pound (GBP) is facing pressure against the US Dollar (USD) as concerns over an escalating trade war between the United States and China shake investor confidence. Market sentiment remains on edge after China announced retaliatory tariffs on US imports, following President Donald Trump’s decision to impose levies on Chinese goods.

As investors navigate these uncertainties, all eyes are now on two key events this week: the Bank of England’s (BoE) monetary policy decision and the US Nonfarm Payrolls (NFP) report. Both could significantly influence the direction of the GBP/USD pair in the coming days.

Trade War Jitters: US vs. China Tensions Weigh on Markets

The financial markets have been rattled by growing trade tensions between the world’s two largest economies. President Trump recently announced new tariffs on Chinese imports, igniting fresh fears of an extended trade war. In response, China hit back with its own set of tariffs, imposing levies on key US exports, including coal, crude oil, and agricultural products.

This back-and-forth between Washington and Beijing has left investors feeling uncertain about the future of global trade. The possibility of even stricter tariffs in the coming months could dampen market sentiment further, reducing risk appetite among traders and leading to increased volatility in currency markets.

At the same time, there has been a temporary pause in tariffs on Canada and Mexico, offering some relief. President Trump agreed to delay new tariffs on these North American neighbors in exchange for certain concessions on border security and crime enforcement. While this decision initially weakened the US Dollar, the broader uncertainty surrounding US-China relations continues to keep investors on edge.

Key Market Events to Watch: BoE Decision & US Jobs Data

1. Bank of England’s Monetary Policy Decision

One of the most significant events this week for the British Pound is the BoE’s upcoming interest rate decision. The central bank is widely expected to cut rates, as markets have already priced in multiple rate reductions for the year.

Central Bank Policies

A rate cut would make borrowing cheaper, potentially stimulating economic activity. However, lower interest rates also tend to weaken a currency, meaning the GBP could face additional downward pressure if the BoE follows through with its expected rate cuts.

Adding to the uncertainty, UK government bond yields have declined in anticipation of these policy moves. Investors are closely watching whether the BoE will signal further easing beyond this week, which could determine the Pound’s near-term trajectory.

2. US Nonfarm Payrolls Report

Another crucial market event is the US Nonfarm Payrolls (NFP) report, scheduled for release on Friday. This monthly employment report is one of the most closely watched economic indicators, as it provides a snapshot of job growth in the US economy.

If job numbers come in stronger than expected, it could reinforce the belief that the Federal Reserve will maintain its current policy stance, strengthening the US Dollar. On the other hand, weaker job data could increase speculation about potential Fed rate cuts, which might provide some support to the Pound.

GBPUSD is moving in a descending channel and the market has fallen from the lower high area of the channel

GBPUSD is moving in a descending channel and the market has fallen from the lower high area of the channel

In addition to the NFP data, investors are also watching the JOLTS Job Openings report, which gives insight into labor demand. A decline in job openings might signal cooling in the labor market, influencing expectations for future Fed policy decisions.

US labor market might be cooling down

How These Factors Could Impact GBP/USD?

The GBP/USD exchange rate is currently facing headwinds due to multiple factors:

  1. US-China Trade War Risks – The uncertainty surrounding tariffs and trade restrictions could drive investors toward safe-haven assets, favoring the US Dollar over the Pound.
  2. BoE’s Rate Cut Expectations – If the Bank of England confirms a dovish outlook, it could weaken the GBP further.
  3. US Economic Data Releases – Strong US employment numbers may boost the Dollar, putting additional pressure on the Pound.

GBPUSD is moving in a descending channel and the market has reached the lower high area of the channel

GBPUSD is moving in a descending channel and the market has reached the lower high area of the channel

Overall, the short-term outlook for GBP/USD remains uncertain, and traders will be keeping a close watch on upcoming economic events to gauge potential market movements.

What’s Next for the British Pound?

As we head deeper into the week, the Pound’s performance will largely depend on how markets interpret the BoE’s policy decision and the US jobs data. If the BoE signals a cautious approach to rate cuts or surprises with a more optimistic tone, the GBP could regain some strength. Conversely, a clear indication of further easing could push the Pound lower against the US Dollar.

For now, the ongoing US-China trade conflict remains a wildcard, with any new developments likely to impact risk sentiment globally. Traders and investors should stay alert to further policy announcements and economic data releases that could shape currency movements in the near future.


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