GBPUSD, Dow Forecast: Markets Hold Gains Despite Tariff Threats

Key Events to Watch:

• U.S. reciprocal tariffs vs. inflation concerns
• GBP/USD climbs to 2025 highs at 1.2570
• Dow Jones sustains its rally near record highs
• Technical Analysis: GBP/USD & Dow (3-Day Time Frames)

U.S. Economy: Inflation vs. Tariff Uncertainty

With CPI data signaling persistent inflation risks, the Fed maintaining rates with no signs of near-term cuts, and escalating tariff concerns, why hasn’t the U.S. dollar surged higher? Following Trump’s announcement of reciprocal tariffs, the extended timeline for implementation has dampened the dollar’s reaction, allowing room for potential negotiations and trade agreements. Markets largely perceive these tariffs as a strategic leverage tool, leading to cautious dollar movement, continued stock market gains, and gold holding its ground amid persistent uncertainty and lack of clarity.

UK Economy: Pound Holds Strength Above Key Levels

Beyond the U.S. dollar's cooling bullish momentum, GBP/USD has maintained its rebound, holding above critical oversold levels and the key 1.20 barrier. The pair is currently trading near its 2025 high of 1.2570, supported by better-than-expected UK GDP data. The latest UK GDP report showed growth surging to a 7-month high, rising from 0.1% to 0.4%, reinforcing the pound’s resilience.

However, despite a strong U.S. economy and continued pound strength, U.S. inflation metrics remain a key concern. U.S. CPI surged to multi-month highs, with:

• Core CPI hitting a 10 -month peak
• Annual CPI climbing back to 3%

The sustainability of these trends remains uncertain, as inflationary pressures could eventually limit risk appetite and weigh on market sentiment.

Technical Analysis: Quantifying Uncertainties

GBPUSD Forecast: 3-Day Time Frame – Log Scale

Source: Tradingview

The pound’s bullish momentum is eyeing fresh 2025 highs, with the 3-day RSI aligning with the neutral 50 zone.

• A close above 1.2570, alongside RSI strength above 50, could extend the rally toward 1.2770 and 1.2870, reinforcing a longer-term bullish trend
• On the downside, the trendline connecting higher lows from January to February 2025 serves as strong support
• Any reversal from 1.2570 is expected to find initial support near 1.24 and 1.2360
• A further breakdown below 1.2360 could extend losses toward 1.2280 and 1.21

Dow Forecast: 3-Day Time Frame – Log Scale

Source: Tradingview

The Dow Jones remains in a minor contracting consolidation, characterized by small indecisive candles with higher lows and lower highs throughout February, maintaining dominance above the 44,500 level. Between AI optimism, strong growth metrics, and persistent inflation concerns, the Dow continues to hold its gains, awaiting a new catalyst for a breakout.

The current market uncertainty aligns with Trump’s tariff announcements, which, on one hand, support domestic production and economic growth, but on the other, raise concerns over trade retaliation and inflationary pressures.

• A firm close above 45,200 could fuel a move toward 46,200 and 47,200, reinforcing a continued bullish trend

• On the downside, if the Dow decisively closes below 43,700, breaking channel support, losses could extend toward 43,200, 42,100, and 41,700, aligning with the mid-zone of the duplicated channel

Written by Razan Hilal, CMT

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