GBP/USD continues to rally, searching for 1.2900

• GBP/USD rose another 0.85% on Wednesday as the Pound rally continues.
• Greenback flows are softening as markets bet on tariff pivots.
• Cable's three-day rally has surged around 2.6%.

GBP/USD hit the gas pedal and pumped out another strong session on Wednesday, lurching higher by another 0.85% and notching in a third straight session of firmly bullish gains. Pound markets are firmly recovering after weeks of uneasy risk appetite, pushing GBP/USD to 16-week highs.

Despite warnings that the UK economy is overall weakening, Cable markets rallied following Wednesday's Monetary Policy Hearings from the Bank of England (BoE). According to BoE Governor Andrew Bailey, A modest uptick in inflation is expected despite weaker growth figures, causing markets to readjust their rate-cut expectations for the rest of 2025. Rate markets now see less than 50 bps of total interest rate trims for the remainder of the year.

ADP Employment Change for February showed only 77K new jobs, well below the forecast of 140K and March's 186K. Despite this, the ADP results have consistently failed to correlate with Nonfarm Payrolls (NFP) since a reporting change in 2022, meaning the poor performance holds little significance.

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This week, the Trump administration announced a one-month delay on tariffs for the automotive sector, which relies heavily on foreign trade. This exemption was retroactively declared as Trump's team seeks to impose tariffs on trading partners without harming the US economy.

There is little of note on the UK side of the economic data docket this week, leaving this Friday's US Nonfarm Payrolls (NFP) as the key print for traders to worry about. US net jobs additions are expected to rebound slightly in February to 160K from January's overwhelmingly unremarkable 143K print.

GBP/USD price forecast

GBP/USD's 100+ pip gain on Wednesday has pushed price action well above the 200-day Exponential Moving Average (EMA) near 1.2685. The pair could be poised for a new medium-term bull run, but a brief exhaustion play could be on the cards as technical oscillators continue to signal overbought conditions. 

GBP/USD has gained 6.62% bottom-to-top since mid-January's swing low into the 1.2100 handle. However, nearly a quarter of those gains have come in the last three days, with Cable rising over 323 pips since the start of the week, implying a general rise in volatility may lead to disappointing long-term momentum.

GBP/USD daily chart