June 2, 2025 – Written by David Woodsmith

STORY LINK GBP/USD Forecast: Dollar on the Ropes, Pound to Challenge 39-Month Best

Unease over tariffs, the US economic outlook and underlying unease over fiscal policy sapped dollar support on Monday.

US equity future also lost ground which hampered the US currency.

After dipping to 1.3450 on Friday, the Pound to Dollar (GBP/USD) exchange rate surged to around 1.3550 on Monday and near 39-month highs just below 1.3600 posted last week.

According to UoB; “the current price movements still appear to be part of a range trading phase, albeit a higher one, between 1.3400 and 1.3600.”

Any break above 1.3600 would be likely to trigger another round of buying.

Late on Friday, President Trump announced that the tariffs on steel and aluminium imports into the US would be increased to 50% from 25% on June 4th.

In an immediate reaction, the EU Commission threatened to retaliate and added; “This decision adds further uncertainty to the global economy and increases costs for consumers and businesses on both sides of the Atlantic.”

The legal row over Trump’s reciprocal tariffs is also a key element after an appeals court overturned an immediate ban and stated that tariffs could remain in effect until the legal process is completed.

There are expectations that the process will end up in the Supreme Court.

Danske Bank commented; “legal challenges have introduced considerable uncertainty into ongoing trade negotiations, with US trading partners now reassessing the most likely outcomes.”

According to ING; “Either the Supreme Court overturns the existing ruling, in which case, nothing changes. Or, if that fails, then surely the US Administration simply rebuilds these tariffs through other means, which there are plenty of.”

It added; “In the meantime, that may well embolden Trump to crack on with other sectoral tariffs on the likes of chips and pharma, which are not subject to this court action.”

Over the weekend, the US and China also exchanged barbs over compliance with existing trade agreements.

ING commented; “It’s not quite fair to say that the US-China trade deal reached in Geneva last month is unravelling, but both sides clearly seem frustrated.”

It added; “Any early end to the deal, which lasts until 12 August, would hit risk assets and the dollar again. All the while, talks with both the EU and China are not exactly going well.

The clock is also ticking on the July 9th deadline when the 90-day tariff pause is due to expire.

According to Nordea; “The US administration is reportedly already planning alternatives under different US laws to impose tariffs, and we do not think the threat of major tariffs has receded in any way.”

MUFG commented; “The risk is that prolonged policy uncertainty in the US will hurt the US economy more leading to a weaker US dollar.”

Fiscal policy also remains an important background focus.

According to Nordea; “We do note that fiscal worries have been a recurring market theme in the US in the past years, but usually only for a relatively short period of time.”

It added; “Only time will tell, whether this time will be different. However, at least it is easy to argue that since the current uncertainties go well beyond fiscal worries and rising public debt and include doubts towards USD investments more broadly, this time the risks in favour of clearly higher risk premia.”

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EUR/USD Analysis Summary Today

• Overall Trend: Upward.
• Today’s Euro-Dollar Support Levels: 1.1300 – 1.1220 – 1.1170.
• Today’s Euro-Dollar Resistance Levels: 1.1385 – 1.1460 – 1.1530.

EUR/USD Trading Signals:

• Buy Euro-Dollar from the 1.1240 support level with a target of 1.1420 and a stop-loss of 1.1150.
• Sell Euro-Dollar from the 1.1430 resistance level with a target of 1.1100 and a stop-loss of 1.1510.

EUR/USD Technical Analysis Today:

we expect the EUR/USD price to move within narrow ranges around last week’s closing levels, awaiting market and investor reactions to this week’s significant economic events and data. These include the European Central Bank’s monetary policy decisions and US jobs figures. The Euro-Dollar is currently in a neutral position with a greater upward bias, led by bulls pushing towards the 1.1400 resistance level.

Technically, this resistance is sufficient to push the 14-day Relative Strength Index (RSI) away from the midline and also lift the MACD indicator lines higher. Today’s Euro-Dollar trading will be influenced by the release of the Manufacturing Purchasing Managers’ Index (PMI) for European economies. This will start with the Spanish reading at 10:15 AM EEST, followed by the French, Italian, and German readings, respectively. The US reading will be later on the same day at 5:00 PM EEST. Three hours later, there will be new statements from Federal Reserve Governor Jerome Powell.

US-European Trade Dispute and Its Impact on Exchange Rates

There will be important repercussions for trade negotiations between the European Union and the United States. For example, trade talks between the EU and the US will see a reduction in the urgency to make concessions. According to forex trading experts, the influence of Trump administration trade representatives in their negotiations with trade partners has certainly diminished. Consequently, the selling of the US dollar was one of the largest “tariff deals,” and thus, with tariffs now threatened, this position is expected to unravel. However, for now, the Euro’s losses against the dollar have been minimal.

In another context, analysts pointed out that the Federal Reserve’s May monetary policy meeting minutes were relatively hawkish, with comments indicating that almost all committee participants noted the risk of inflation persisting longer than expected. Overall, financial markets believe that the probability of a US interest rate cut by the Federal Reserve in July does not exceed 20%.

Uncertainty surrounding the economy as a whole will be renewed, and there will also be an impact on budget revenues.

Forecasts for ECB Decisions This Week:

The European Central Bank will hold its latest monetary policy meeting this week, with financial markets confident of an additional 25 basis point cut in the deposit rate to 2.00%. RBC Capital Markets expects a difficult meeting, stating: “We believe there are sharp divisions on the board, and we would be very surprised if the decision was unanimous.” There is also much less conviction about the outlook. According to ING: “Unless trade tensions escalate strongly, we believe the ECB will prefer to take a wait-and-see approach over the summer.”

According to the results from the economic calendar data, German retail sales data was weaker than expected, falling by 1.1% for April. Therefore, Wells Fargo does not expect sustained support for the Euro, stating: “In our view, the European currency will continue to face the reality of weak sentiment and confidence surveys, and disappointing growth performance.”

Credit Agricole is also cautious about the Euro’s outlook, as the Eurozone remains in a dilemma, with the latest estimates pointing to stagnant economic activity and a significant slowdown in inflation. In this context, the ECB is likely to lower its growth and inflation forecasts, along with cutting interest rates for the seventh consecutive time.

European Stock Market Performance and Future Gains

According to trading on stock brokerage platforms, both the Euro Stoxx 50 and Stoxx 600 indices closed near flat last Friday but achieved gains exceeding 3.5% in May, marking their strongest monthly performance since January. The oil and natural gas, healthcare, and utilities sectors led this rally. Investors were digesting new inflation data from the Eurozone’s largest economies, with consumer price index figures showing a decline in inflation in Germany, Italy, and Spain, which could give the European Central Bank more room to cut borrowing costs at its upcoming meeting this week.

Meanwhile, increasing uncertainty regarding the ongoing US trade dispute prevented further gains. A federal appeals court temporarily reinstated President Donald Trump’s tariffs, just one day after a trade court ruled that he had exceeded his authority. In the interim, US Treasury Secretary Scott Bessent stated that trade talks with China are “a bit stalled.” Among individual stocks, SAP (+1.2%), Siemens (+1.6%), and L’Oréal (+1.7%) were among the best performers, while Sanofi lagged the most, falling by 4.4%.

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Platinum price forced to delay the bullish rally, due to  the continuation of the main indicators contradiction, to reach below the initial support near $1056.00, but the main stability within the bullish channel’s levels that appear in the above image will decrease the negative effect in the current trading, depending on forming an extra support at 38.2%Fibonacci correction level by its stability near $1042.00.

Therefore, we expect to form weak sideways trading until we gather the positive momentum, which allows it to attack the$1068.00 level, then attempts to resume the bullish attack, by targeting the top at $1100.00 reaching the next main target near $1125.00.

The expected trading range for today is between $1042.00 and $1068.00

Trend forecast: Fluctuated within the bullish trend

Platinum price forced to delay the bullish rally, due to  the continuation of the main indicators contradiction, to reach below the initial support near $1056.00, but the main stability within the bullish channel’s levels that appear in the above image will decrease the negative effect in the current trading, depending on forming an extra support at 38.2%Fibonacci correction level by its stability near $1042.00.

Therefore, we expect to form weak sideways trading until we gather the positive momentum, which allows it to attack the$1068.00 level, then attempts to resume the bullish attack, by targeting the top at $1100.00 reaching the next main target near $1125.00.

The expected trading range for today is between $1042.00 and $1068.00

Trend forecast: Fluctuated within the bullish trend

I wrote on 25^th May that the best trades for the week would be:

1. Long of Bitcoin following a daily (New York) close above $111,743. This did not set up.
2. Long of the GBP/USD currency pair. This gave a loss of 0.54%.
3. Short of the USD/ZAR currency pair. This gave a loss of 1.01%.

The overall loss of 1.55% equals a loss of 0.52% per asset.

Last week was broadly very quiet, with stock markets inching higher, especially in Germany, where the DAX reached a new all-time high before turning more bearish towards the end of the week. There were no dramatic news releases or unexpected economic data to change the mood from mildly risk-on.

Last week’s most important data releases were:

1. US Core PCE Price Index – as expected.
2. US FOMC Meeting Minutes – no surprises.
3. US Preliminary GDP – just a tick lower than expected.
4. German Preliminary CPI (inflation) – as expected.
5. Australian CPI (inflation) – just a tick higher than expected.
6. RBNZ Official Cash Rate, Rate Statement, and Policy Statement – a 0.25% cut as expected, although a slightly dovish tilt was made on the path of future rate cuts, although this had little effect on the Kiwi.
7. US Unemployment Claims – slightly worse than expected.

After markets closed for the week, President Trump announced the tariff on steel and aluminium will be doubled this Wednesday from 25% to 50%. This will likely produce a more risk-off market as the week gets underway, but there is always a chance that a deal will be announced before Wednesday.

The coming week has what will probably turn out to be a more decisive schedule of high-impact data releases.

This week’s important data points, in order of likely importance, are:

1. US Non-Farm Payrolls and Average Hourly Earnings
2. European Central Bank Policy Meeting
3. US ISM Services PMI
4. US JOLTS Job Openings
5. Bank of Canada Policy Meeting
6. Swiss CPI (inflation)
7. Australia GDP

The most impactful events on the Forex market will likely be the top two items.

For the month of June 2025, I forecast that the EUR/USD currency pair will increase in value.

For the month of May 2025, I made no monthly forecast as although there was a long-term trend against the US Dollar, the price action suggested that a major bullish reversal could be underway.

As there were no unusually large price movements in Forex currency crosses over the past week, I make no weekly forecast.

The US Dollar was the strongest major currency last week, while the Japanese Yen was the weakest. However directional movement was very low. Volatility decreased last week, with only 7% of the most important Forex currency pairs and crosses changing in value by more than 1%. Next week’s volatility is likely to be higher.

You can trade these forecasts in a real or demo Forex brokerage account.

Last week, the US Dollar Index printed a hammer candlestick which closed higher but with a large upper week. I see this as, surprisingly to some, a bearish candlestick. The price remains close to the multi-year low made a few weeks ago. There is a clear long-term bearish trend.

The bullish case is represented by the fact that the price has not yet broken the multi-year low, and in this area at the low we have a horizontal level which has already proved to be strong support, at 97.67.

I think it makes sense to be trading in line with the long-term trend which will be short of the greenback. If there is short-term bearish momentum when the price opens this week, you should be more confident in going short here.

The EUR/USD currency pair made a new multi-year high in April above the round number at $1.1500, but since then it made a bearish retracement followed by another upwards movement. However, that sounds much more bearish than the price action really looks. It seems the bullish momentum is running out of steam.

Despite that reason to be cautious for bulls, the price is still not far from a multi-year high, so a bullish push could dramatically change the technical scenario here.

Another factor that might give bulls a tailwind is the long-term bearish trend in the greenback, and the impending tariff deadline in July, as well as president Trump’s announcement a few hours ago that tariffs on steel and aluminium would be doubled from 25% to 50% effective this Wednesday, might also help to push the price higher.

I will enter a new long trade in this currency pair if we get a daily (New York) close above $1.1513.

The GBP/USD currency pair reached a new multi-year high price at the start of last week, well above $1.3500. However, it then fell over the remainder of the week, although trend traders are likely to mostly still be long here.

I see the long-term strength in the British Pound (boosted by higher than expected inflation producing an outlook of relatively high interest rates) coupled with the long-term bearish trend in the US Dollar as likely to produce more long-term bullish breakouts here, which might be successfully traded with a relatively tight trailing stop – about 1 ATR daily of a long-term value tends to work best with this currency pair.

I will enter a new long trade if we get a daily (New York) close above $1.3558.

The S&P 500 Index rose last week as risk sentiment improved a little, with the price ending the near local highs above the support level at 5,777, which is also confluent with the 200-day moving average, as can be seen in the daily chart below.

President Trump’s announcement that he will double the tariff on steel and aluminium this Wednesday is not necessarily believed as certain to take effect, but it is quite likely to produce a bearish open when the US stock market opens this week. This agenda item will also likely cause markets to start thinking that the July tariff deadline is also approaching for the whole world’s trading relationship with the USA, so that could be another factor adding to bearishness here.

Although the price is trading not very far from its record high and above the 200-day simple moving average, it is worth noting that this Index is below its level of 6 months ago, which is a bearish sign – showing the price has basically been trading sideways for half a year.

On the other hand, the fact that the price seems to be strongly respecting the confluent support area at about 5,777 is a bullish factor.

I will be very to go long of this Index in the unlikely event that we get a daily close above 6,142.

Bitcoin continued to decline, quite firmly, over the week. The price is now looking a little heavy as it threatens the $102,500 which looks like a pivotal line in the sand. If the price gets below $101,500 it will be more than 3 times the long-term ATR from the highest daily close, which will shake out most trend traders, and possibly produce a stronger fall.

I will enter a new long trade if we get a daily (New York) close above $111,743 this week but I think this is unlikely to happen.

The shine seems to have come off Bitcoin, but this area around $101,500 to $102,500 does look pivotal, so a bullish bounce from there might signify a good long trade entry opportunity, but I will be more cautious.

I see the best trades this week as:

1. Long of Bitcoin following a daily (New York) close above $111,743.
2. Long of the GBP/USD currency pair following a daily (New York) close above $1.3513.
3. Long of the EUR/USD currency pair following a daily (New York) close above $1.3558.
4. Long of the S&P 500 Index pair following a daily (New York) close above 6,142.

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