GBPUSD: SELL 1.3350, SL 1.3370, TP 1.3250 | 21 May 2025

GBPUSD:

GBP/USD rose at the start of the new trading week, briefly testing 1.3400 for the second time in a fortnight. Despite the early bullish momentum in cable trading, buyers failed to record a new high and price returned to the calmer 1.3350 level.

Ratings agency Moody's stripped the United States (US) of its last remaining AAA rating on Treasuries last Friday, citing rising US debt and government budget deficits that successive presidential administrations are either unwilling or unable to bring under control. Investor sentiment flinched at the sight of the headlines, but quickly recovered and accepted the blow to US creditworthiness. Still, all is not rosy in Treasury markets, with 30-year bond yields topping 5 per cent on Monday and 10-year yields trading above 4.5 per cent.

Federal Reserve (Fed) speakers went to work this week to temper market expectations for a rate cut. All Fed policymakers have gently but firmly reminded investors that continued U.S. tariff and trade policies make it nearly impossible to forecast the domestic economy and, as a result, adjust rates.

On Wednesday, the latest UK Consumer Price Index (CPI) inflation data is scheduled to be released and is expected to jump significantly on both a monthly and annualised basis. UK core CPI inflation is forecast to rise to 3.7% y/y from 3.4%. The key economic data release this week on the US Pacific side will be the S&P Global Purchasing Managers' Index (PMI) data for May.

Trading recommendation: SELL 1.3350, SL 1.3370, TP 1.3250

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