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06.05.2025 07:06 PM
GBP/USD Analysis – May 6th: The Pound Ignores the BoE

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The wave structure for the GBP/USD pair has also transitioned into a bullish, impulsive formation—"thanks" to Donald Trump. The wave picture is nearly identical to that of EUR/USD. Prior to February 28, we were observing a convincing corrective structure that posed no major concerns. However, demand for the U.S. dollar then began to decline sharply. The result was the construction of a five-wave upward structure. Wave 2 took a single-wave form and is now complete. Consequently, we can expect a strong rise in the British pound within wave 3, which has already been underway for three weeks.

Considering the fact that domestic UK news had no real influence on the pound's strong growth, one can conclude that currency markets are currently ruled by Donald Trump. If (theoretically) Trump's trade policy direction changes, it is not unlikely that the trend may also reverse—to a bearish one. Therefore, in the coming months (or even years), it will be essential to closely monitor all actions from the White House.

The GBP/USD pair rose by 70 basis points on Tuesday. There was virtually no significant news background throughout the day, yet this did not stop the market from once again increasing demand for the British currency. This rise came ahead of the BoE and Fed meetings, where, notably, decisions are expected that are not favorable for the pound. The Bank of England is likely to cut the interest rate by 25 basis points, and its updated economic forecasts are unlikely to be raised amid the peak of a trade war. Therefore, demand for the pound should, in theory, be declining.

The Fed will most likely leave the interest rate unchanged, but Jerome Powell might soften his stance on maintaining it at 4.5%, as the U.S. economy stands on the brink of a recession. As such, demand for the U.S. dollar could fall, but the true direction will only become clear by Wednesday evening.

The problems in the British economy haven't disappeared and could resurface in new forms soon. There's currently no information in the media about Trump's demands on the UK or any negotiations with London. However, the market believes that Trump treats Britain much more leniently than China or the EU, and that his demands are therefore more feasible. A trade agreement with Britain seems quite likely. This would be good for the UK economy, but the Bank of England is also guided by inflation figures. Over the past two months, inflation has dropped from 3% to 2.6% year-over-year, so a round of monetary policy easing is quite justified. Based on all of the above, I believe the chances of a BoE rate cut are much higher than a dovish shift from the Fed. Yet, the pound is still rising.

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General Conclusions

The wave pattern for GBP/USD has shifted. We are now dealing with a bullish, impulsive trend segment. Unfortunately, under Donald Trump, the markets may continue to experience numerous shocks and trend reversals that defy any wave structure or technical analysis. The construction of wave 3 continues, with near-term targets at 1.3541 and 1.3714. Of course, it would be ideal to see a corrective wave 2 within wave 3 before the uptrend resumes—but it seems the dollar cannot afford such luxury at the moment.

On the higher wave scale, the wave picture has transformed. We can now anticipate the construction of a bullish trend segment. The nearest targets are 1.2782 and 1.2650.

Core Principles of My Analysis

  1. Wave structures must be simple and clear. Complex structures are difficult to trade and are often unstable.
  2. If there is no confidence in the current market situation, it's better to stay out of the market.
  3. There is never 100% certainty in market direction. Always use protective Stop Loss orders.
  4. Wave analysis can be combined with other types of analysis and trading strategies.
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