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The GBP/USD currency pair remained in a downward trend on Tuesday, a trend that has persisted for almost a month. We noted that throughout this month, there have been formal reasons for the market to sell the British pound. It is worth starting with the last Bank of England meeting, where, unexpectedly for many, a decision was almost made to lower the key interest rate. The vote was just one short, while the market expected a much more decisive victory for the so-called "hawks." Then a new package of British data was released, revealing that inflation had fallen to 3%, that fourth-quarter GDP growth was a "mere" 0.1%, and that the unemployment rate had increased. Consequently, the market's "dovish" expectations for the next BOE meeting became nearly certain. This explains the decline of the British currency.
However, during the same period, several unpleasant reports from the United States were also published, alongside the actual revision of trade conditions between the U.S. and all countries. Recall that the UK was the first to negotiate a deal with Donald Trump, agreeing to tariffs of 10%. After Trump's speech on Saturday, these tariffs were increased to 15%. Just like that, the American president raised tariffs for the UK, which, even after the declaration of a trade war with the entire world, was still considered friendly to America (unlike, for example, Canada).
One might wonder why Trump did not keep the tariffs for London at 10%. The answer lies in the Trade Act of 1974, under which Trump imposed the new tariff package. This law prohibits any discrimination through tariffs. In other words, Trump could only set uniform tariffs for all. Why not maintain a 10% tariff rate? Because in that case, U.S. budget revenues would significantly decrease.
Trump has relied on tariffs as a key source of budget replenishment. It's now emerging that the U.S. government owes American consumers approximately $150 billion, that all tariffs have been declared illegal, and that, under new laws, tariffs have limitations, meaning Trump can no longer generously apply a 100% rate at the border for any country. To minimize the budgetary impact, a maximum rate of 15% has been set, which can remain in effect for up to 150 days. After that, the U.S. Congress must approve the extension of these tariffs, which, of course, is unlikely to happen—even assuming both chambers of Congress remain "Republican."
Thus, Trump has effectively gone all in. Of course, tariffs can be imposed under many other laws, and Trump's team is likely working day and night to find new ways to leverage them against the world. But until those paths are found, all countries must pay 15% for importing goods into the U.S. Additionally, all sector-specific tariffs remain in effect and are fully operational.
The average volatility of the GBP/USD pair over the last 5 trading days is 77 pips. For the pound/dollar pair, this value is considered "average." On Wednesday, February 25, we expect movement within the range of 1.3450-1.3604. The upper channel of the linear regression is directed upwards, indicating a trend recovery. The CCI indicator has entered oversold territory, signaling a potential end to the correction.
The GBP/USD currency pair is poised to continue its 2025 upward trend, and its long-term outlook remains unchanged. Trump's policies will continue to exert pressure on the U.S. economy, so we do not expect the U.S. currency to grow in 2026. Even its status as a "reserve currency" no longer holds significance for traders. Thus, long positions with targets of 1.3916 and above remain relevant for the near term as long as the price is above the moving average. If the price is positioned below the moving average line, one may consider small shorts with targets at 1.3450 and 1.3428 on a technical (corrective) basis. From time to time, the American currency shows corrections (in a global sense), but for trend growth, it needs global positive factors.
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