The GBP/USD forecast indicates uncertainty about the outlook for Trump’s policies, which has left the dollar vulnerable. Meanwhile, the pound strengthened after data in the previous session showed a resilient labor market.

Before Trump’s inauguration, investors were grappling with the likely impact of Trump’s policy proposals. Most had expected an aggressive start to his new term with clear guidance on tariffs and taxes. 

However, that was not the case on Monday. Trump’s new administration failed to give clear guidance. Although Trump later announced his plans to impose tariffs on Mexico and Canada, it was already clear that he would not be as aggressive as thought. As a result, the dollar weakened against its peers, like the pound. 

Market participants are awaiting economic data for clues on Fed rate cuts. At the same time, Trump will speak later in the day, and his speech might contain hints on his policy plans. 

Meanwhile, the pound held steady after data in the previous session revealed that UK pay growth was solid in the three months to November. At the same time, monthly unemployment claims dropped to 700 compared to estimates of 10,300. 

Nevertheless, Bank of England rate cut bets remained fairly unchanged. Economists expect a rate cut in February and three more in 2025. Later in the week, business activity data will shed more light on the outlook for UK monetary policy.

GBP/USD key events today

• US unemployment claims
• President Trump speaks

GBP/USD technical forecast: Bulls trigger channel breakout

(Click on image to enlarge)

GBP/USD 4-hour chart

On the technical side, the GBP/USD price has broken out of its bearish channel resistance, signalling a likely bullish reversal. Initially, the price was in a downtrend, making lower highs and lows. Moreover, it was trading in a bearish channel. However, sentiment shifted when it broke above the SMA and the channel resistance. 

Furthermore, GBP/USD broke above the 1.2250 key level with a solid bullish candle. It retested the level and rose to a higher high, confirming a new uptrend. Bulls are now eyeing the 1.2400 resistance level. A break above this level would allow the price to revisit the 1.2550 resistance level. The bullish trend will continue if the price stays above the SMA and the RSI above 50.

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