Trading GBP, Gold & Bitcoin Amidst Diverging Policies

GBP/USD: Policy Divergence and Political Uncertainty

BoE vs. Fed Dynamics:

 The Bank of England (BoE) is expected to adopt a dovish stance in 2025, with up to three rate cuts priced as we battle an unstable UK economy. In contrast, the Federal Reserve remains very careful, which has been backed by strong US growth under the new Trump administration. 

On Thursday, the Bank of England cut interest rates to tackle the expected hit from U.S. President Donald Trump’s tariffs. The BoE cut the rates to 4.25%. The pound rallied and two-year borrowing costs jumped as markets saw a much reduced chance of another rate cut in June. Thursday’s decision was the British central bank’s first since Trump announced wide-ranging tariffs on April 2, which caused a lot of volatility in the markets.

The BoE said it thought tariff increases by the U.S. and other countries would trim British economic growth and push down on inflation, but stressed the outlook was unclear.

The BoE has now cut interest rates by the same amount as the U.S. Federal Reserve since mid-2024, but by less than the European Central Bank due to concerns about high wage growth.

Investors have expected the BoE to reduce rates to about 3.4% since last year, but with the situation looking less likely now, this has reduced expectations for inflation. The economy is also expected to grow this year.

Technical Pressure:

The Dollar continues to hold at the major support level of 1.316 after economic data releases (CPI and PPI) last week, and this has helped us see the GBPUSD stay in bullish territory. 

The data Statistics showed that the annual producer inflation, as measured by the PPI index, declined to 2.4%, and there were 229,000 weekly Initial Jobless Claims in the US. 

XAU/USD (Gold): Safe-Haven Demand vs. Dollar Strength

Fed Policy Impact: 

The feds have released rates between 4.25 and 4.5% in the past few weeks, and this has made the dollar rally over the last weeks. A few factors have backed the strength  of the dollar, which include:

• Economic resilience 
• Inflation expectations 
• Yield resilience 

Geopolitical and Inflation Hedge: 

The rising tension in conflict in the Middle East and Ukraine, as well as a few political turmoils in Europe, have increased economic uncertainty globally and, as such, increased the demand for safe havens like Gold. The recent turn of events between the US and China has also affected the markets, as we saw the market find support at $3,100 to maintain a bullish structure.

We have also seen a number of  Central banks starting to accumulate gold in a bid to reduce dependence on the US dollar.

Gold continues to face challenges from the rising strength of the dollar, but fundamentally, we still continue to shift towards bullish moves. A few factors include. 

1. Fed communication
2. Economic data
3. Geopolitical developments
4. Dollar trajectory

While we have completed short-term sells, the latter part of 2025 can still revive the rally as there is a lot of financial uncertainty and a weak dollar. 

Bitcoin (BTC): Consolidation signals volatility ahead 

We have seen weeks of low volatility, and the market has ranged between $103,000 and $105,000.

There is increasing interest in bitcoin as the ETFs have seen another great week with inflows up to $1.7 billion. Market valuation of $2 trillion has also seen BTC as a supreme for all other cryptocurrencies. With continuous adoption by institutions, we can see a strong rally to the upside. 

Technical Analysis using Price Action

This review focuses on candlestick patterns, Key levels, market structure, and imbalances in the market. This strategy helps to review XAUUSD, GBPUSD. 

XAUUSD  

Price action review :

Gold has declined from $3500 in the last 4 weeks as a correction from the impulse buys. We have also seen a complete cycle move of the correction as we completed the ABC correction, this confirmation was also backed by the rejection at the psychological level of $3,100, and also the breaker block rejection. On a daily as well we have seen the market tap into the FVG and create a shift in market structure on the 1Hr. Market sentiments are starting to shift across all time frames, and we would be looking for buys to fill the $3,335 Gap that was created last week.

Bullish Scenario

Trigger:

• If price breaks the resistance key level $3,255 and trades above $3,260, then we look for more buys into $3,335 to fill up last week’s Gap.
• We also need to see the price’s maintaining structure in the Daily channel drawn above. 

Target:
      –   If price breaks $3,260 resistance level next target for the buys would be $3,335.

GBPUSD

Price action review : 

GBPUSD  has bounced off 1.32 support levels after being stuck in a range for the past few weeks. The last 2 weeks have shown rejections from key levels and seen buys creep back into the markets.

Looking to the upside, we need to see a price break and close above 1.345, which would also be a break of the bullish flag, and we can seek more buys. 

Bullish Scenario

Trigger:

• Price has already created a chart pattern in the form of a bullish flag.
• We also need to see a price breakout of the daily range at the 1.345 level for more buys.

Target:
      –   First weekly target is 1.345, and the break and retest above 1.345 would seek more buys into the 1.37 region.