May 21, 2025 – Written by David Woodsmith

STORY LINK GBP/USD Forecast: Pound Finds Fleeting Gains vs Dollar as UK Inflation Soars

The Pound to US Dollar (GBP/USD) exchange rate struck its strongest level since early 2022 on Wednesday, following the publication of hotter-than-anticipated UK inflation data.

At the time of writing, GBP/USD was trading at approximately $1.3405, Virtually unchanged from Wednesday’s opening levels, but down from a high of $1.3469 briefly struck earlier in the session.

The Pound (GBP) initially jumped on Wednesday morning after the UK’s latest consumer price index revealed inflationary pressures were building more rapidly than forecast.

Figures from the Office for National Statistics (ONS) showed headline inflation climbing to 3.5% in April, a notable jump from the previous reading of 2.6% and higher than the expected 3.3%. Core inflation also surprised to the upside, accelerating from 3.4% to 3.8%.

The initial reaction saw GBP surge across the board as investors speculated that sticky inflation could push the Bank of England (BoE) to adopt a more cautious approach on monetary easing. With rate cut bets being pared back, markets quickly priced in a longer period of elevated interest rates.

However, the Pound’s rally didn’t last. As markets analysed the underlying details, it became clear that much of the inflation increase was driven by volatile components, such sharp rise in road tax and increased air fares over the Easter period.

As a result, economists argued that the data was unlikely to alter the BoE’s overall outlook, with most analysts still expecting the central bank to deliver at least two rate cuts later in the year.

The US Dollar remained on the defensive midweek, unable to recover from the recent wave of selling triggered by deteriorating confidence in the US economy.

Concerns about government borrowing and economic slowdown have been growing, particularly after Moody’s decision to cut the US’s credit rating. The move cast a shadow over the long-term sustainability of US fiscal policy and sparked a fresh rise in Treasury yields.

In addition to debt concerns, trade policy uncertainty and mixed economic indicators have made it difficult for the USD to find firm footing. While hopes for a near-term rate cut from the Federal Reserve have cooled, with analysts fearing this will place even more pressure on the US economy in the coming months.

Looking ahead, the UK’s latest PMI releases are likely to shape the direction of the Pound US Dollar exchange rate on Thursday.

Forecasts suggest continued weakness in the UK’s manufacturing sector may offset gains in services, keeping the private sector’s recovery uneven. If the composite PMI slips further, it could reinforce expectations for BoE rate cuts and weigh on the Pound.

Over in the US, S&P’s latest PMI figures are also due. While not as closely watched as the ISM data, they could still influence USD sentiment. A weaker-than-expected reading may deepen concerns over the health of the US economy and extend downside pressure on the Dollar.

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts

May 21, 2025 – Written by Ben Hughes

STORY LINK Euro to Dollar Forecast: Danske Hold 12 Month Target of 1.20

The US Dollar has come under renewed pressure on Wednesday and the Euro to Dollar (EUR/USD exchange rate has secured a further strong gain to 2-week highs around 1.1350.

A sustained break above 1.1350 could lead to a challenge on 1.15 while failure could trigger a sharp correction.

MUFG commented; “Any sign of pushing trading partners in Asia (Japan this week) to conducting less or stopping US dollar buying intervention would likely trigger further big moves weaker for the dollar.”

ING sees scope for a dollar recovery; “We think some USD-positive headlines on trade coming from the G7 summit in Canada can put a lid on EUR/USD before the end of the week.” It does not see a near-term move to 1.1500.

Danske Bank maintains a 12-month target of 1.20.

The dollar has been undermined by unease over US fiscal trends and speculation that the US Administration will look for key trading partners to accept stronger currencies which would put wider downward pressure on the US currency.

The Euro has also gained support from evidence of further net capital flows into the Euro area.

G7 Finance Ministers will meet in Banff Canada on Wednesday and Thursday with rumours reverberating across markets.

ING commented; “US Treasury Secretary Scott Bessent is set to hold several bilateral meetings in the coming days. If current speculation proves accurate – and the US is pushing for stronger trading partner currencies – it could not only prompt sharp appreciation in those currencies but also weigh on the dollar more broadly.”

HSBC considers that speculation of currency talk is overblown; “The reports have tried to spin this into a possible precursor to some kind of deal to strengthen the JPY as part of a trade deal with the US. Nothing the finance minister has said would support this thesis.”

Credit Agricole added; “We continue to believe that the US would not explicitly abandon its “strong USD” policy and further think that the US Treasury Secretary Bessent could reiterate that a stable and strong currency is in the US best interest.”

The dollar could also gain net support if trade talks make progress.

ING added; “Incidentally, recent developments suggest that the US administration tends to dial down trade tensions after direct talks with other leaders, and any signs of de-escalation should provide some support for the dollar.”

Markets are also monitoring wider US fundamentals with the US Administration looking to get the Budget Bill passed in the House of Representatives.

MUFG commented; “There are other factors at play too that are reinforcing dollar selling pressure. Investors remain concerned over the fiscal outlook in the US with the Wall Street Journal reporting that a deal on the SALT cap to unify the Republicans has been reached to get the tax cutting bill moving through Congress.”

According to Goldman Sachs; “The U.S. still faces the worst growth-inflation mix of the major economies, and as the fiscal bill makes its way through Congress, eroding U.S. exceptionalism is proving – literally – costly at a time of large funding needs.”

The dollar will struggle if there is evidence of a sustained net asset flows away from the US.

SocGen noted that previous credit-rating downgrades have not had a sustained impact but commented; “the big driver of FX moves at the moment is a loss of attraction in US assets in general. Or, more particularly, a realization that everyone is very overweight something that might be a little riskier than they thought.”

The Euro area recorded the second-largest current account surplus on record for March and there were further net inflows into Euro-Zone capital markets.

MUFG commented; What has also become clear from the flow data on the financial account side of the balance of payments is that the end of negative rates in core Europe has helped to draw in demand for euro-zone fixed income from abroad.

These flows will provide structural Euro support.

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.

TAGS: Euro Dollar Forecasts

May 21, 2025 – Written by David Woodsmith

STORY LINK Pound to Dollar Forecast: GBP Gains on USD Weakness, UK Inflation

A combination of U.S. Dollar weakness and stronger than expected UK inflation triggered a surge in the Pound to Dollar (GBP/USD) exchange rate to 3-year highs just below 1.3470.

The pair, however, was unable to hold the gains and retreated to 1.3410 as the Pound dipped and the dollar recovered from Asian lows.

A sustained break above 1.3445/50 remains key to generating further medium-term gains.

According to UoB; “based on the current momentum, any advance might find the late April high of 1.3445 difficult to break.”

Markets now consider that a June Bank of England rate cut is very unlikely, but the longer-term debate is continuing to rage amid the debate over underlying inflation.

According to the ONS, the headline year-on-year inflation rate posting a stronger than expected surge to 3.5% from 2.6% previously and above consensus forecasts of 3.3%.

The core rate increased to 3.8% from 3.4% and above market expectations of 3.6%.

A key element was the increase in retail energy prices. There was also upward pressure from transport, recreation and culture which was offset by some weakness in clothing and footwear.

The goods inflation rate increased to 1.7% from 0.6% while the services-sector rate jumped to 5.4% from 4.7%.

Following the data, markets were less confident that there would be two further rate cuts this year, but views were mixed.

Luke Bartholomew, deputy chief economist at the fund manager Aberdeen; “we think a quarterly profile of rate cuts remains appropriate, but the chance of the easing cycle speeding up any time soon has fallen.

Goldman Sachs economist James Moberly sees a June cut as being off the agenda, but does not expect further increases in inflation and added; “in fact, we see services inflation falling back below the BoE’s projections later in the year.”

He added; “Given the restrictive policy stance, notable labour market loosening, a likely deceleration in pay growth, and a softer near-term demand outlook, we therefore continue to expect the Bank to accelerate the pace of cuts in the second half.”

In contrast, Berenberg considers that the BoE might not be able to cut rates again this year if services inflation increases further; “That would be evidence that demand is solid enough for companies to pass on increases in their costs, and force the Bank of England to take an extended pause in their cutting cycle until services inflation is on a downward path again.”

The dollar index retreated to 2-week lows before a tentative recovery.

Danske Bank commented; “This seems reflective of the fiscal jitters related to last week’s downgrade from Moody’s and the overly accommodative tax bill now being discussed in Congress.”

ING commented; “Periods of data silence often serve as a useful gauge of the market’s underlying bias in FX. So far this week, the tendency to add to USD short positions has been clear.”

There will be a series of G7 meetings in Canada over the next few days with speculation that the US will push for other countries to strengthen their currencies as part of any trade deals.

ING added; “If current speculation proves accurate – and the US is pushing for stronger trading partner currencies – it could not only prompt sharp appreciation in those currencies but also weigh on the dollar more broadly.”

MUFG added; “any sign of pushing trading partners in Asia (Japan this week) to conducting less or stopping US dollar buying intervention would likely trigger further big moves weaker for the dollar.”

If there are no hints over a preference for a weaker US currency, there could be scope for the dollar to recover ground.

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts

USD/JPY Technical Analysis

The US dollar has fallen pretty significantly during the early hours on Wednesday against the Japanese yen, which partially is due to the fact that the interest rates in Japan are spiking all of a sudden. In fact, Japanese government bonds have literally had no bids for two days. What this means is eventually the Bank of Japan is going to have to step in and drive yields down.

So, this is a market that I’m looking at very closely because it hasn’t broken yet. But if and when the Japanese come in and start doing yield curve control, that will put the yen on the back foot. In the short term, we have a lot of support right in this general vicinity. So, although I want to get long of this market in the long term, I’m waiting for that momentum candle.

AUD/USD Technical Analysis

The Australian dollar has rallied a bit during the trading session on Wednesday in the early hours, but it also looks like we are struggling. I think quite frankly, this is a market where money went to die. There’s just nothing here, and we’re stuck in the same range that we have been in for quite some time. If you are a short-term trader, then you like this setup because the 0.6350 level underneath offers massive support, while the 0.65 level above offers massive resistance. As we continue to chop back and forth, again, if you’re a short-term trader, this is your market. If you’re looking for a bigger trade, we have to break out of this consolidation area first.

For a look at all of today’s economic events, check out our economic calendar.

• You can see that the British Pound has been fairly quiet against the US Dollar during the trading session on Tuesday as we continue to look at the 1.34 level as a bit of a barrier.
• The question now is whether or not we can break above here and it’s not that we can’t, it’s just that since 2018 we’ve spent a majority of our time below this level.

So, I am very interested in it because I do think that if we are going to see the US dollar really start to strengthen, we could see the British pound fail here. We are starting to see US dollar strength against multiple currencies. Although in all fairness, the last major US dollar strengthening push that we had seen, the British pound held its own in relation to other currencies such as the euro or the Canadian dollar, Japanese yen, etc. So, with that being said, it might be more of a slow grind if the short idea does work out.

But keep an eye on the 1.32 level because that’s an area that should be support. And if we break down below there, the 50 day EMA ends up being a target followed by the 1.30 level.

I have no real serious interest in trying to go long of this market until we break above the 1.35 level. Because I think at that point, we start to see a change in attitude. And I think we start to see that the British pound really starts to take off. It’s been a strong move to the upside. But quite frankly, you need to work off some of that fraud. Now the question, of course, is whether or not we are going to be able to find that momentum to the upside, or if we finally fall apart.

Ready to trade our GBP/USD Forex analysis? Here are the best regulated trading platforms UK to choose from.

Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

• EUR/USD trades above 1.1300 in the European session on Wednesday.
• The broad-based USD weakness helps the pair push higher.
• The near-term technical outlook suggests that the bullish bias remains intact.

EUR/USD preserves its bullish momentum early Wednesday and trades at a fresh two-week-high above 1.1300 after closing the second consecutive day in positive territory on Tuesday. The pair’s near-term technical picture highlights a buildup of bullish momentum.

The US Dollar (USD) remained under bearish pressure on Tuesday and helped EUR/USD stretch higher. The lack of progress in US-China trade relations and the political uncertainty in the US seem to be causing the USD to lose interest.

China’s Commerce Ministry said the United States’ measures on China’s advanced chips are “typical of unilateral bullying and protectionism,” adding that the US violates international law by abusing export controls to contain and suppress China. Meanwhile, the Congressional Budget Office (CBO) noted that US President Donald Trump’s tax bill, which are yet to be approved by House Republicans, could add roughly $3.8 trillion to the national debt. Earlier in the week, Moody’s announced that it downgraded the US’ sovereign credit rating to ‘AA1’ from ‘AAA’, citing concerns about the unsustainable deficit.

Meanwhile, European Central Bank Governing Council member Klaas Knot said on Tuesday that the medium-term inflation outlook is too uncertain to say whether the ECB needs to cut key rates again in June.

Investors will pay close attention to political developments in the US and headlines surrounding geopolitics in the second half of the day. If House Republicans pass Trump’s bill, the USD could find some demand with the immediate reaction. However, such a decision could feed into debt fears and make it difficult for the USD to gather strength sustainably. Additionally, a re-escalation of US-China trade tensions could trigger another leg lower in the USD and allow EUR/USD to extend its weekly rally.

EUR/USD Technical Analysis

EUR/USD climbed above 1.1270, where the 100-period Simple Moving Average (SMA) on the 4-hour chart, the Fibonacci 38.2% retracement of the latest uptrend and the 50-period SMA converge. Additionally, the Relative Strength Index (RSI) indicator climbed above 60, reflecting a buildup of bullish momentum.

On the upside, interim resistance seems to have formed at 1.1340 (static level) before 1.1380 (Fibonacci 23.6% retracement) and 1.1430 (static level). Looking south, supports could be spotted at 1.1270, 1.1200 (static level, round level) and 1.1170 (Fibonacci 50% retracement).