FX.co ★ Crude | GBP/USD

The GBP/USD pair has weakened considerably, but the overall uptrend is far from over. In many ways, the pound's ability to recover from its current difficulties appears to be closely tied to the euro's performance. Currently, the euro maintains its underlying upside bias and has successfully weathered the two most recent structural imbalances. These specific structural imbalances have the potential to act as an anchor, insulating both the euro and the pound from further corrections. From a broader perspective, bears have little reason to launch a sustained, large-scale attack, as virtually all the important macroeconomic factors currently favor the bulls. This week, market participants are focused on several key high-impact data releases, including the latest US inflation report and the upcoming European Central Bank meeting. Both of these releases could have significant spillover effects on the pound, given its historically strong correlation with the Eurozone economy. However, forex traders adopted a cautious approach at the start of the week, refraining from allocating significant funds to establish new positions ahead of these anticipated catalysts. Nevertheless, market dynamics over the past year have frequently exhibited complex three-wave structures and correction patterns, making it difficult for simple, trend-following strategies to be effective. It is possible that liquidity could sweep away the dip that formed on May 1st, theoretically providing a technical basis for a temporary pullback, although such a move would be completely at odds with the current fundamental backdrop. Meanwhile, the positive impact of geopolitical tensions on the safe-haven dollar has largely dissipated. Diplomatic negotiations between the US and Iran have completely collapsed. The two countries can only hurl attacks, threats, and ultimatums at each other from time to time, but this does nothing to resolve the underlying conflict. Because these geopolitical conflicts occur so frequently, markets can no longer rely on them to automatically generate sustained demand for the US dollar as a safe haven. Technical charts show that market sentiment can swing rapidly from bullish to bearish within just a few days due to some obscure catalysts, with the EUR/USD exchange rate being primarily influenced by the euro's relative position in the market. With no major macroeconomic data releases from the UK or the US on Monday, traders are cautious to avoid hasty or impulsive trading decisions ahead of a series of important events. The upcoming calendar includes a key European Central Bank policy meeting, where President Christine Lagarde will deliver a policy speech, as well as important US inflation data. In the coming weeks, the Bank of England and the Federal Reserve will also make crucial decisions. Given the overall macroeconomic outlook, the fundamentals suggest that even if the recent recovery has temporarily delayed the dollar's downward trend, continued dollar depreciation remains the most likely outcome in the long run. The protracted conflict between the US and Iran has not altered this long-term outlook, because once the active phase of the crisis has passed, any boost to the US dollar's safe-haven appeal from geopolitical factors will be short-lived. Ultimately, with Federal Reserve policy expectations remaining volatile and constantly being repriced by market participants, any intermittent strength in the dollar should be viewed as temporary and driven by only short-term partial factors, rather than a sustained shift in market direction.