The GBP/USD exchange rate caught a strong bid tone in the European morning on Monday, pushing to within touching distance of 1.2950. This bullish move is developing against a backdrop of renewed US Dollar weakness fed by a more favorable global risk appetite. At the same time, easing US reciprocal tariff concerns has changed the sentiment. According to industry reports, these tariffs are actually more limited and less stringent than expected.
The EUR/USD continued to enjoy an upbeat tone, hovering around 1.0850 in early European trading on Monday. This is in stark contrast to a three-day downward trek that ended just before the holiday, underlining how powerful the shift in global risk sentiment has been. A softer approach to reciprocal tariffs was proposed in 2018 by then US president Donald Trump. This news has helped raise the hopes for a global market rebound, just a bit.
The monetary policy views of the Federal Reserve and the Bank of England (BoE) aren’t completely aligned. It’s this divergence that continues to elevate buyer optimism. The GBP/USD recently broke above its 200-day simple moving average (SMA). This action is an unequivocal sign of bullish intent in the market. All of these developments take place as traders await the release of important economic data and speeches that may provide further direction for the markets.
Market participants will be looking at the next UK and US PMIs with great interest. Further still, they await direction from the forthcoming address by BoE Governor Andrew Bailey regarding the direction of Britain’s economic and monetary policy. Inflation from Tokyo and Australia are due and might offer even more context for the currency-market tempests.
All four of these factors will heavily shape investor expectations. In addition, they will have a major effect on currency valuations in the short run.