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06.11.2025 03:08 AM
The GBP/USD currency pair struggled to avoid a new collapse on Wednesday. Yesterday, we pointed out that there were no grounds for a new fall of the British currency. We maintain that view today. Many experts believe the decline in the British currency, which has been falling for a month and a half, is due to the new speech by UK Chancellor Rachel Reeves. Is this true?
Let's not hide the fact that Reeves is like a red rag to a bull for currency traders. As soon as traders see the word "Reeves," they immediately start to divest from the British currency to avoid potential losses. However, it is essential to remember that we seek not emotions but concrete and logical arguments. For instance, Reeves first caused the pound's decline several months ago when she couldn't control her emotions during a speech in Parliament and broke down in tears. Yes, we are talking about the Treasury head. The situation is that Reeves is currently criticized only by the lazy while she is tasked with crafting an appropriate budget for the next fiscal year.
A few weeks ago, Reeves again caused the pound to drop when she stated that the UK government would have to adopt a series of unpopular measures to close the budget deficit. Reeves hinted at tax increases, and here is the kicker! Rumors of tax hikes in the UK have been circulating for several months. Overall, everyone understands that if there is a budget deficit, additional revenue is necessary. This means either tariffs or taxes. Since Donald Trump cannot govern both the UK and the U.S. simultaneously, the British Parliament decided to pursue tax increases.
And on Tuesday, Reeves publicly reiterated the need to raise certain taxes. What's new and unexpected for the market about this, especially when the idea of tax increases has been in the air for several months? Imagine a situation where next week, Reeves speaks publicly again and announces the need for tax increases. Will the British pound drop another 100 pips? What if Reeves speaks every week? What if she speaks every day?
We want to convey that if the head of the Treasury indeed provoked the pound's decline on Tuesday, the market has already been processing this news for the second or third time. However, it continues to ignore a whole host of negative factors for the U.S. dollar. One pertinent example is that on Monday, a clearly weak and significant ISM manufacturing activity index in the U.S. was published, but for some reason, the market ignored it. Meanwhile, it has responded with three times the intensity to the same message from Reeves.
Thus, we continue to believe that the market uses any excuse to sell the GBP/USD pair, and there is no logic in this downward movement. The market selectively processes the fundamental backdrop. It turns a blind eye to all negative factors affecting the dollar while responding aggressively to all negative factors affecting the pound at 230%.
The average volatility of the GBP/USD pair over the last 5 trading days, as of November 6, is 78 pips, which is considered "average." On Thursday, we expect the pair to trade within the range of 1.2958-1.3114. The upper linear regression channel is directed downward, but due to a technical correction on higher timeframes. The CCI indicator entered the oversold territory four times in October (!!!), which may provoke a new upward trend.
The GBP/USD currency pair is attempting to resume its 2025 upward trend, and its long-term prospects remain unchanged. Donald Trump's policies will continue to exert pressure on the dollar, so we do not expect the American currency to appreciate. Currently, the daily timeframe still indicates a flat. Therefore, long positions with targets of 1.3672 and 1.3733 remain much more relevant when the price is above the moving average. When the price is below the moving average line, small short positions can be considered with targets at 1.2958 and 1.2939 on purely technical grounds. From time to time, the U.S. dollar may correct, but for the trend to strengthen, it needs real signs of an end to the trade war or other global positive factors.
