Forex Analysis & Reviews: 08.05.2025 - GBP/USD Analysis on May 8,...

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08.05.2025 07:40 PM

GBP/USD Analysis on May 8, 2025

The wave structure for GBP/USD has also transformed into a bullish, impulsive pattern—"thanks" to Donald Trump. The wave picture is nearly identical to that of EUR/USD. Until February 28, we observed the formation of a clear corrective structure that raised no concerns. However, demand for the U.S. dollar then began to plummet rapidly. As a result, a five-wave bullish structure formed. Wave 2 became a single-wave correction and is now complete. Thus, we can expect a strong rise in the pound within wave 3, which has already been unfolding for three weeks.

If we consider the fact that the news background from the UK had no influence on the pound's strong rally, we can conclude that currency movements are driven primarily by Donald Trump. If (theoretically) Trump changes his course on trade policy, the trend may also reverse—this time into a bearish one. Therefore, in the coming months (or even years), it will be essential to closely monitor all developments from the White House.

The GBP/USD rate rose by about 40 basis points on Thursday, but the rate may fluctuate significantly by the end of the day, as the market has not yet fully priced in the BoE's decision. The Bank of England's key decision—to cut the interest rate by 25 basis points—was widely expected and predicted. However, it turned out that two members of the MPC voted to keep the rate unchanged, while two supported a 50-basis-point cut.

That's not all. The BoE raised its economic growth forecast for 2025 and lowered its inflation outlook. Recall that at the beginning of the year, Andrew Bailey warned of surging prices. Later, when Trump initiated a global trade war, inflation fears only grew stronger. Now it turns out that the UK regulator expects stronger economic growth and a faster inflation slowdown. Strange, to say the least.

Nonetheless, the market liked this idea, and after a brief drop, demand for the pound rose again. Still, I wouldn't put all the blame (or credit) on the BoE. Let's not forget that confidence in the U.S. dollar is currently held by no one. The market understands that Trump's trade war caused GDP growth to slow from 2.4% to -0.3% in Q1. Growth is expected to return in Q2, but it's too early to say, as Trump has yet to finish his crusade for global trade "fairness." Therefore, further tariffs, higher existing tariffs, and additional sanctions or restrictions can't be ruled out. Since everything in the world is interconnected, Trump is essentially shooting himself in the foot. His approach is clear—he wants to extract concessions through threats and bluffing. The question is, who will end up conceding and ignoring the bluff?

General Conclusions

The wave structure for GBP/USD has shifted. We are now dealing with a bullish, impulsive trend segment. Unfortunately, under Donald Trump, markets may face numerous shocks and reversals that contradict any wave count or technical analysis. Wave 3 of the bullish trend is continuing, with short-term targets at 1.3541 and 1.3714. Ideally, we would see a solid corrective wave 2 within wave 3 before further growth, but the dollar appears unable to afford such luxury at this point.

On the higher wave scale, the wave pattern has also turned bullish. We can now anticipate a longer-term uptrend. The nearest targets are 1.2782 and 1.2650.

Core Principles of My Analysis:

Wave structures should be simple and clear. Complex structures are difficult to trade and often change.
If there's no confidence in the market situation, stay out.
There is never 100% certainty in the direction of movement. Always use protective Stop-Loss orders.
Wave analysis can be combined with other forms of analysis and trading strategies.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.