Pound sterling price strengthens to $1.327 as dollar eases ahead of U.S.-China talks
GBP/USD rises near 1.3270 after U.S.-UK trade deal
The pound sterling edged higher on Friday, trading near 1.327 against the U.S. dollar after recovering from intraday losses. The move came as the dollar retreated slightly following its strong rally on Thursday, driven by optimism surrounding the new U.S.-UK trade agreement. With the Federal Reserve maintaining its benchmark rate at 4.25%–4.50% and the Bank of England lowering its policy rate by 25 basis points to 4.25%, markets are now watching how upcoming global trade negotiations will shape monetary policy expectations.
Investors welcomed Thursday’s announcement of the first bilateral deal between the U.S. and UK under President Trump. Though the economic impact of the agreement may be modest—given the U.S. already runs a trade surplus with the UK—the symbolic value helped reinforce confidence that tariff policy may be more strategic than punitive. Still, the real test lies ahead, as U.S. and Chinese officials are set to meet this weekend in Switzerland to discuss potential de-escalation of the trade war.
GBP/USD price dynamics (April 2025 - May 2025) Source: TradingView.
GBP/USD technical picture clouded by reversal pattern
While GBP/USD has gained ground, the outlook remains technically cautious. On the 4-hour chart, the pair is showing early signs of a Head and Shoulders (H&S) pattern following a failed push beyond the three-year high of 1.3445. This formation suggests a potential bearish reversal, particularly with the pair now trading below the 50-period EMA at 1.3305.
The Relative Strength Index (RSI) is hovering near the 40 level, signaling fragile momentum. A drop below 40 could intensify downside pressure and open the door for a retest of the key psychological support at 1.3. On the upside, reclaiming levels above 1.33 remains essential to neutralize the bearish setup and re-target resistance at 1.3445.
BoE policy and global trade shifts steer next move
The pound remains supported by a moderately dovish BoE tone, a 7-2 vote split, and an upgraded GDP forecast of 1% for 2025. However, Governor Andrew Bailey has warned of rising global risks due to persistent trade frictions. With the Fed signaling caution over stagflation risks and inflationary pressures, the near-term trajectory for GBP/USD will depend on the tone and outcomes of this weekend’s U.S.-China talks.
As previously outlined in our May outlook, the pair was vulnerable to a technical pullback after testing multi-year highs. With 1.3270 now acting as a pivot, traders will look for clarity from trade talks and central bank signals before committing to further directional bets.
