The GBPUSD price continued to rise to breach 1.2415$ and settle above it, which represents 23.6% Fibonacci correction level for the decline from 1.3434$ to 1.2100$, which opens the way to achieve more bullish correction and head to visit 1.2609$ areas on the near-term basis.

Therefore, the bullish bias will be suggested for the upcoming sessions, taking into consideration that breaking 1.2415$ will stop the bullish wave and push the price back to the main bearish channel again.

The expected trading range for today is between 1.2375$ support and 1.2530$ resistance

Trend forecast: Bullish

The GBPUSD price continued to rise to breach 1.2415$ and settle above it, which represents 23.6% Fibonacci correction level for the decline from 1.3434$ to 1.2100$, which opens the way to achieve more bullish correction and head to visit 1.2609$ areas on the near-term basis.

Therefore, the bullish bias will be suggested for the upcoming sessions, taking into consideration that breaking 1.2415$ will stop the bullish wave and push the price back to the main bearish channel again.

The expected trading range for today is between 1.2375$ support and 1.2530$ resistance

Trend forecast: Bullish

January 26, 2025 – Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: GBP/EUR Turns Corner

The Pound Sterling (GBP) overall secured a tentative recovery against the Euro (EUR) during the week amid relief that the bond market stabilised.

From 4-week lows near 1.1800, the Pound to Euro exchange rate (GBP/EUR) advanced to around 1.1860.

Bank of America (BoA) is still forecasting that GBP/EUR will strengthen to 1.25 at the end of 2025.

BNPP has greater reservations over the Pound but forecasts GBP/EUR at 1.2050 at the end of 2025.

According to BoA , Pound selling has been overdone; “Price action at the start of the year has in some sense solidified our sense that a lot of negativity is now priced in.”

It added, “The UK is set once again to outpace European growth, with a healthier policy mix to offset the worst excesses of tariffs.”

The bank also expects yields to be positive for the pound throughout the year.

The latest UK business confidence data indicated a slight improvement from December, but the underlying components were weak, with business confidence at 2-year lows.

There was evidence of increased inflation pressures within the economy while consumer confidence dipped for the month.

The data overall increased concerns over the potential stagflation threat with difficulties for the Bank of England.

BNPP is more concerned over the Pound outlook; “Now, however, we no longer think higher UK yields are beneficial for the GBP, and we do not think the GBP is pricing in sufficient risk premium to reflect a range of potential negative scenarios.”

BNPP noted two potential threats; “On the first channel, the recent rise in UK yields has increased debt servicing costs to the extent that the government no longer has sufficient headroom against its debt rule. We think this raises the prospect of a change in fiscal policy – tax rises or spending cuts – that would be negative for growth.”

Markets remain confident that the BoE will cut in February, but the long-term outlook is opaque.

BNPP added; “Our base case is for four 25bp rate cuts this year and, as this is not sufficiently priced in by front-end UK rates, we see this undermining the GBP.”

HSBC noted the risk of growth downgrades; “the Office for Budget Responsibility (OBR) was forecasting 2.0% growth in 2025. If it revises that down in March, fiscal headroom could be eroded, meaning some tightening measures are needed. That tightening in turn might reduce growth prospects further – and increase the case for rate cuts.”

MUFG noted the potential significance of US trade policy; “Market participants are less concerned over the immediate risk of higher tariffs being put in place by the US against the EU, while the unease over rising Gilt yields temporarily undermined the attractiveness of the yield pick-up in the UK that encouraged EUR/GBP to trend lower throughout last year.”

There are strong expectations that the ECB will cut interest rates by a further 25 basis points at the January policy meeting, which would take the deposit rate down to 2.75%.

Nordea commented, “Inflation is converging towards the target, the economic outlook remains challenging, and rates clearly remain in restrictive territory, calling for more gradual rate cuts.”

Credit Agricole noted that market expectations surrounding ECB rates may be too low and added, “Any such confirmation could help the EUR to turn the corner from mid-2025.”

Euro-Zone business confidence data was slightly stronger than expected for January and there could be scope for a Euro-Zone rebound.

BNPP notes the potential for increased government spending and the possibility that the Ukraine war could end; “A resolution could benefit the EUR through both the sentiment and growth channel.”

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TAGS: Currency Predictions Pound Euro Forecasts

January 26, 2025 – Written by Frank Davies

STORY LINK Pound to Dollar Rate Forecast Warning: Risk for GBP/USD Slide to 1.15

Foreign exchange analysts at Nordea expect dollar strength to dominate for much of the year. It sees the risk of GBP/USD sliding to at least 1.15 with an end-2025 forecast of 1.17.

In contrast, Bank of America expects GBP/USD gains to 1.38.

US data did not have a significant impact during the week, although a weaker-than-expected business confidence report did undermine the US currency on Friday.

The primary attention was on President Trump’s policy agenda. His call for lower interest rates and no immediate move to impose tariffs helped trigger a correction for the dollar.

UK data was mixed with more substantial earnings growth offset by weaker consumer confidence and mixed business confidence data.

UK bonds were relatively stable, which helped underpin the Pound amid an element of short-covering

In this environment, the Pound to Dollar (GBP/USD) exchange rate posted significant gains to 1.2480 from 1.2170.

According to Nordea, “We expect that the strong US economy and weak economic activity in the rest of the world will lead to a strong dollar year. The economic gap might even grow larger and result in an even stronger dollar.”

Nordea also expects that US trade policies will support the dollar.

It added; We think EUR/USD will fall down to parity, but would not be surprised if the economic gap widens and the currency pair drops below parity.

GBP/USD will inevitably struggle if EUR/USD slides below parity.

ING noted that in real terms, the dollar is at 40-year highs, maintaining speculation that the Administration will look to drive the currency lower.

According to the bank, “We cannot see that happening this year, although Washington may try to find a way to get trading partners to strengthen their currencies under the threat of tariffs. Such a policy could just about be read as consistent with also wanting to maintain the dollar as the pre-eminent reserve currency.”

Nevertheless, it added, “For the time being, however, the narrative of US exceptionalism is alive and well, the tariff threat remains real and we doubt the Fed will knock the dollar off its perch.”

Morgan Stanley sees scope for a dollar reversal; “While dollar bulls are numerous and perhaps most vocal in expressing their views, there seems to be a more ‘silent’ plurality of investors looking to sell the dollar instead. Many have dry powder and are waiting for a sign to enter shorts.”

It added, “Investors may be far more willing to add dollar shorts sooner and with higher conviction than dollar bulls may anticipate,” wrote the strategists. “For them, it’s more a question of timing rather than direction.”

Bank of America considers that the Pound is oversold with scope for a solid recovery; “we believe that there appears to be a large dose of “never let the facts get in the way of a good story” to price action.

It added, “This potentially reflects a number of factors, some of which are beyond the remit of this note, but we do think that the “glass half-empty” approach to the UK outlook appears to be the default position for markets, perhaps a legacy from a decade of political and macroeconomic uncertainty and amplified by September 2022.”

The bank expects stronger relations with Europe to help trigger a rebound in pound confidence, especially with positive yields.

MUFG, however, expects the Pound will be vulnerable; “Further evidence of a softening UK labour market this week alongside the loss of growth momentum at the end of last year will keep pressure on the BoE to cut rates further.”

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TAGS: Currency Predictions Pound Dollar Forecasts

January 26, 2025 – Written by Frank Davies

STORY LINK Pound to Dollar Rate Forecast Warning: Risk for GBP/USD Slide to 1.15

Foreign exchange analysts at Nordea expect dollar strength to dominate for much of the year. It sees the risk of GBP/USD sliding to at least 1.15 with an end-2025 forecast of 1.17.

In contrast, Bank of America expects GBP/USD gains to 1.38.

US data did not have a significant impact during the week, although a weaker-than-expected business confidence report did undermine the US currency on Friday.

The primary attention was on President Trump’s policy agenda. His call for lower interest rates and no immediate move to impose tariffs helped trigger a correction for the dollar.

UK data was mixed with more substantial earnings growth offset by weaker consumer confidence and mixed business confidence data.

UK bonds were relatively stable, which helped underpin the Pound amid an element of short-covering

In this environment, the Pound to Dollar (GBP/USD) exchange rate posted significant gains to 1.2480 from 1.2170.

According to Nordea, “We expect that the strong US economy and weak economic activity in the rest of the world will lead to a strong dollar year. The economic gap might even grow larger and result in an even stronger dollar.”

Nordea also expects that US trade policies will support the dollar.

It added; We think EUR/USD will fall down to parity, but would not be surprised if the economic gap widens and the currency pair drops below parity.

GBP/USD will inevitably struggle if EUR/USD slides below parity.

ING noted that in real terms, the dollar is at 40-year highs, maintaining speculation that the Administration will look to drive the currency lower.

According to the bank, “We cannot see that happening this year, although Washington may try to find a way to get trading partners to strengthen their currencies under the threat of tariffs. Such a policy could just about be read as consistent with also wanting to maintain the dollar as the pre-eminent reserve currency.”

Nevertheless, it added, “For the time being, however, the narrative of US exceptionalism is alive and well, the tariff threat remains real and we doubt the Fed will knock the dollar off its perch.”

Morgan Stanley sees scope for a dollar reversal; “While dollar bulls are numerous and perhaps most vocal in expressing their views, there seems to be a more ‘silent’ plurality of investors looking to sell the dollar instead. Many have dry powder and are waiting for a sign to enter shorts.”

It added, “Investors may be far more willing to add dollar shorts sooner and with higher conviction than dollar bulls may anticipate,” wrote the strategists. “For them, it’s more a question of timing rather than direction.”

Bank of America considers that the Pound is oversold with scope for a solid recovery; “we believe that there appears to be a large dose of “never let the facts get in the way of a good story” to price action.

It added, “This potentially reflects a number of factors, some of which are beyond the remit of this note, but we do think that the “glass half-empty” approach to the UK outlook appears to be the default position for markets, perhaps a legacy from a decade of political and macroeconomic uncertainty and amplified by September 2022.”

The bank expects stronger relations with Europe to help trigger a rebound in pound confidence, especially with positive yields.

MUFG, however, expects the Pound will be vulnerable; “Further evidence of a softening UK labour market this week alongside the loss of growth momentum at the end of last year will keep pressure on the BoE to cut rates further.”

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TAGS: Currency Predictions Pound Dollar Forecasts

Created on January 24, 2025

• The euro drifted a little bit lower during the trading session on Thursday as we continue to hang around the 0.8450 level.
• The pound of course has given up some strength for a while, but I think a lot of this is just simple profit taking.

After all the market had been in a massive downtrend for what seemed like a lifetime and then dropped down toward the 0.8250 level to bounce that’s an area that’s been important as support all the way back to 2016 so the bounce is not a huge surprise. The question then becomes what happens next because we have to look at this through the prism of a market that is going to continue to see a lot of questions asked of both economies and with this, I would anticipate this overbought condition eventually breaks down, but I would not get short of the market until we break down below the 200 day EMA.

On a Potential Move Higher…

If we were to turn around and break above the 0.85 level, then the EUR/GBP market could go much higher, perhaps reaching the 0.86 level. The 0.85 level is an area that’s been important multiple times as well, so I think you need to pay close attention to it, but it is worth noting that just a few days ago, we ended up forming a shooting star, which of course is a sign of exhaustion. That exhaustion probably ends up being a nice cell signal if we do get a little bit more downward momentum. The overall trend, of course, is most certainly negative. I don’t wish to fight that. I think we are more likely than not to drop from here, as the euro itself is a bit of a basket case overall. Ultimately, I am still bearish, but don’t necessarily like either of these currencies.

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Created on January 24, 2025

• The US dollar had initially tried to rally during the trading session on Thursday but gave back gains showing signs of hesitation.
• At this point, the market looks very likely to continue to bounce around as it waits to see what the Bank of Japan does next.
• On Friday, the Bank of Japan is coming out with an interest rate decision, and therefore I think it comes down to the question of whether it does anything to tighten monetary policy.

At this point, we will likely see a knee-jerk reaction to whatever happens next. Therefore, I think if the Bank of Japan suddenly sounds like it is going to be tight, we could see this market plunge. Yet, the interest rate differential will continue to favor the US dollar quite drastically, so I think that would end up being a buying opportunity unless, of course, the Bank of Japan does something unprecedented. While rates have risen in Japan just a bit, the reality is that the differential still favors the greenback quite drastically. Of course, the US economy is by far one of the strongest in the world right now, in both hard and soft numbers. Quite frankly, if Trump gets even remotely close to what he’s trying to get done in America, the United States could be back to the 1980s.

Technical Analysis

The technical analysis for the USD/JPY market is somewhat sideways at the moment, but it’s also worth noting that we have been in an uptrend for quite some time. Therefore, I think we are working off some of the froth but also trying to sort out whether the Bank of Japan is going to be an issue. I suspect that by the end of the day on Friday, we should have quite a few questions answered, so I am cautious about getting overly aggressive one way or the other until the BoJ releases all of its noise.

If we were to break down below the 50 Day EMA, then I suspect that somewhere between there and the 200 Day EMA we would find buyers. On the other hand, if we break out to the upside, once the ¥158 level is overcome, as a barrier, it could open up a move to the ¥160 level.

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BoJ Rate Hike Impacts Yen and Forex Markets: What Traders Need to Know

The global financial landscape is abuzz after the Bank of Japan (BoJ) announced its latest interest rate hike. This move not only strengthens the yen but also reshapes the dynamics of the forex markets. In this article, we’ll explore the BoJ interest rate decision, its implications on the yen, and provide an insightful USD to JPY forecast. Let’s dive into the details and make sense of these developments.

What Is the BoJ Interest Rate?

The BoJ interest rate serves as a benchmark for borrowing costs in Japan. By adjusting this rate, the BoJ influences inflation, economic growth, and the yen’s strength on the global stage.

BoJ Interest Rate Hike: A Bold Move

The Announcement

On Friday, the BoJ raised interest rates by 25 basis points. This decision was widely expected, given recent economic data showing steady inflation and rising wages in Japan.

Why the Hike?

The BoJ’s rate hike is a signal of confidence in Japan’s economic stability. By projecting inflation to remain close to its annual target, the central bank has set the stage for potential further hikes.

Impact on the Yen

Immediately following the announcement, the USD to JPY pair dropped by 0.4%. This reflects the yen’s strengthened position against the dollar, a significant shift for forex traders.

USD to JPY Forecast: What’s Next for Traders?

Key Factors Driving USD to JPY Trends

The USD to JPY forecast hinges on several factors:

1. BoJ Policies: Future rate hikes could further boost the yen.
2. US Federal Reserve: Any decision to cut interest rates by the Fed would likely weaken the dollar.
3. Market Sentiment: Geopolitical developments, such as the Russia-Ukraine conflict, continue to play a role in currency movements.

Analyst Predictions

Forex experts anticipate the yen to gain further ground if the BoJ maintains its hawkish stance. However, traders should remain cautious about volatility in the USD to JPY pair.

Trump’s Call for Fed Rate Cuts

The Speech

At the World Economic Forum in Davos, former President Donald Trump urged the Federal Reserve to implement immediate interest rate cuts. His reasoning? Lower oil prices could pressure Russia to resolve the Ukraine conflict, indirectly stabilizing global markets.

Impact on the Dollar

Following Trump’s statements, the US Dollar Index fell by 0.3%. The dollar also faced its worst week in two months, reflecting market concerns over the Fed’s potential response.

Regional Currencies Gain Amid Dollar Weakness

Asian Currencies Rally

The weakened dollar provided breathing room for several Asian currencies:

• The Chinese yuan (USD/CNY) dropped 0.4%.
• The Australian dollar (AUD/USD) gained 0.5%.
• The Malaysian ringgit (USD/MYR) strengthened by 0.6%.

Implications for Forex Markets

These sharp gains highlight how regional currencies can benefit from a strong yen and a weakened dollar, creating opportunities for strategic forex trading.

Impact of Interest Rate Cuts on Investment Banking

Investment Dynamics

When central banks cut interest rates, it often reshapes the investment banking sector. Lower borrowing costs can stimulate corporate funding, while also impacting equity markets.

Regional Effects

In Asia, rate cuts by the Fed or other central banks could enhance liquidity, benefiting emerging economies. However, the strength of the BoJ interest rate could offset some of these gains.

The Broader Picture: A Changing Global Economy

Forex Markets at a Crossroads

The interplay between the BoJ and Fed policies has far-reaching implications for forex markets. Traders must stay informed about developments in the USD to JPY forecast, as well as broader interest rate trends.

Investor Strategies

In this environment, diversification is key. Consider balancing investments across currencies, bonds, and equities to mitigate risks.

Conclusion

The BoJ interest rate hike marks a pivotal moment for the yen and global forex markets. As the USD to JPY pair adjusts to these changes, traders must remain vigilant and adapt their strategies. Understanding the interplay between the BoJ, the Fed, and geopolitical factors is crucial for navigating today’s volatile markets.

FAQs

1. What is the significance of the BoJ interest rate hike?
   It strengthens the yen, influences global forex markets, and signals Japan’s economic stability.
2. How does the USD to JPY forecast reflect market trends?
   It showcases the yen’s strength against the dollar, impacted by BoJ and Fed policies.
3. Why do Fed rate cuts matter to forex markets?
   Lower rates typically weaken the dollar, benefiting other currencies like the yen.
4. What is the impact of interest rate cuts on investment banking?
   Rate cuts stimulate corporate funding but may also affect market stability.
5. How can traders prepare for volatile forex markets?
   By diversifying investments and staying informed about central bank decisions.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.

Created on January 24, 2025

• The British pound has stalled a bit during the trading session on both Wednesday and Thursday, and as I look at the chart, the 1.2350 level is an area that I think a lot of people will be paying close attention to.
• If we can break above there, then it could open up a deeper correction, which would not be a huge surprise, considering that the US dollar had been so strong for so long, that one would have to assume sooner, or later traders would be looking to take advantage of profits and close out positions.
• However, look at this chart as one that will eventually offer value in the greenback, something that I want to take advantage of.

US Economy

One of the biggest drivers of where we are going right now is the US economy, because quite frankly it is much stronger than most others around the world, including the United Kingdom. While the United Kingdom may not be as much trouble as others, the reality is that for some time now, anything not called “the US dollar” has struggled in the Forex world. There are a few outliers such as the Malaysian ringgit, but overall buying US dollars against other currencies has worked out quite nicely. This of course has been no different here, and the fact that money is flying into the United States at the moment it means that US dollars are heavily in demand.

While I do believe that a bounce from here could continue, the 1.25 level should end up being a major barrier. We also have the 50 Day EMA hanging around that area as well, so I think is worth noting that the technical traders will be watching that as well. Quite frankly though, I’m looking for the signs of weakness that will undoubtedly show up and stepping on the GBP/USD pair to the downside. I believe that we will revisit the bottom eventually, but the question just remains at this point as to how long it takes to get there.

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• EUR/GBP struggles to sustain uptrend, facing resistance near 0.8473.
• Pair tests 200-day SMA at 0.8422; could revisit year-to-date high if support holds.
• Potential downward move targets 100-day SMA at 0.8348 if support breaks.

The EUR/GBP failed to extend its gains for the second straight day, as stir resistance near 0.8473 was strong enough to be cleared by bulls. Therefore, the cross tumbles towards the 200-day Simple Moving Average (SMA) at 0.8422 and print losses of 0.03%.

EUR/GBP Price Forecast: Technical outlook

The pair resumed its uptrend on January 8, with the EUR/GBP posting gains of 2.29% in a seven-day span. Nevertheless, the EUR/GBP seems overextended, and it has consolidated above the 200-day SMA. If buyers hold prices above the latter, they could test the year-to-date (YTD) high at 0.8470.

On further strength, 0.8500 comes into play, followed by the August 24 peak at 0.8544. A breach of the latter will expose the August 14 daily high at 0.8592.

Conversely, if sellers drive EUR/GBP below the 200-day SMA, it will reach 0.8400. Further downside is clear, once the latter is surpassed, with bears targeting the 100-day SMA at 0.8348.

EUR/GBP Price Chart – Daily