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The wave pattern for GBP/USD continues to suggest the formation of an upward impulsive wave pattern. The wave picture is nearly identical to that of EUR/USD, as the U.S. dollar remains the primary driver of movement across the market. Demand for the dollar is declining across the board, resulting in similar dynamics among many instruments. Wave 2 of the upward trend has taken the form of a single wave. Within the assumed wave 3, waves 1, 2, 3, 4, and possibly 5 have been completed. Therefore, in the near term, a corrective wave sequence with a decline in the instrument can be expected.
It's important to note that much of the current movement in the currency market depends on Donald Trump's policies—not just trade-related ones. While the U.S. occasionally releases positive economic data, market participants remain focused on persistent uncertainty in the economy, Trump's contradictory decisions and statements, and the White House's hostile, protectionist tone. As a result, the dollar must work hard to translate even positive news into higher demand. So far, it has failed to do so.
The GBP/USD rate gained around 20 basis points on Monday. It's worth noting that there was practically no relevant news flow today. Only the UK GDP report for Q1 was released, which did not come as a surprise to market participants. As expected, the UK economy grew by 0.7% quarter-over-quarter. This report did not spark a new wave of pound buying, but over the long term, the UK economy may begin to outperform the U.S. in terms of growth. It's worth recalling that the only trade deal signed so far without major controversy is the one with the UK. While the deal may not be particularly favorable to Britain, it is still a signed agreement, which means the UK is no longer in Trump's disfavor. The U.S. president himself stated that he "loves the British people," and therefore the trade conditions for them are "special."
Although demand for the British pound declined in the first half of Monday, the pound continues to show strength in the long run. The situation in the U.S. is currently so negative that demand for the dollar cannot increase. In fact, it would be more accurate to say that the dollar's outlook in the U.S. is so weak that it has little chance of strengthening. Everything Trump is doing, he claims to be doing in America's best interest. However, as the saying goes, "the road to hell is paved with good intentions." While Trump's intentions may be well-meaning, his methods are widely criticized—especially by investors and traders, who easily find more stable currencies to invest in. The U.S. stock market continues to rise on expectations of a sharp Federal Reserve rate cut once Trump manages to pressure Jerome Powell. It may not happen until next year, but the market is already pricing it in.
The wave pattern for GBP/USD remains intact. We are currently in a bullish impulsive trend segment. Under Trump's leadership, markets may continue to face significant turbulence and reversals, which could materially alter the wave structure. However, for now, the main scenario remains valid. Trump continues to act in ways that suppress demand for the dollar. The targets of the upward wave 3 are now located near 1.4017, which corresponds to 261.8% of the Fibonacci extension from the assumed global wave 2. Therefore, I continue to favor long positions, as the market shows no signs of reversing the trend.
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