The GBP/USD price analysis shows a pause in the previous session’s decline as caution sets in ahead of the FOMC policy meeting. Meanwhile, market participants watch US political developments for clues on Trump’s tariffs. 

In the previous session, the greenback recovered as the AI turmoil on Monday eased. The US dollar had collapsed amid fears of the impact of a new low-cost AI model in China. This caused a rush to safe-haven assets other than the dollar. 

However, the US currency rebounded on Tuesday as market focus shifted to looming tariffs. At the start of the week, Trump announced duties on specific goods like steel. At the same time, his Treasury secretary has shown support for a universal tariff that will increase monthly. Tariffs on imported goods will shift demand to locally produced goods, boosting the US economy. Increased demand will also likely increase inflation, putting pressure on the Fed to keep interest rates high. 

The US Central Bank will meet on Wednesday and likely keep interest rates unchanged. Moreover, policymakers may remain cautious as they await more clarity on tariffs. Meanwhile, market participants are pricing an 87% chance of a rate cut when the Bank of England meets next week, supporting a bearish outlook.

GBP/USD key events today

• BOE Gov Bailey Speaks
• Federal Funds Rate
• FOMC Statement
• FOMC Press Conference

GBP/USD technical price analysis: Bulls aim for the 1.2550 resistance level

(Click on image to enlarge)

GBP/USD 4-hour chart

On the technical side, the GBP/USD price is bouncing higher after meeting the 1.2425 support level. Moreover, it trades above the 30-SMA with the RSI above 50, supporting a bullish bias. Since the trend reversed at the bottom of the chart, bulls have maintained a steep rally, keeping the price above the 30-SMA. At the same time, the price has made higher highs and higher lows.

The most recent peak paused to allow bulls to rest as the SMA caught up. If bullish momentum remains strong, the price will rally to the 1.2550 resistance level, making a higher high. A break above this resistance would solidify the bullish bias. On the other hand, a break below the 30-SMA would indicate a bearish shift in sentiment, leading to a likely reversal.

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