The wave pattern for GBP/USD continues to indicate the formation of a bullish impulse wave sequence. The wave pattern closely mirrors that of EUR/USD, as the dollar remains the sole driver of the current market dynamics. Demand for the greenback is declining across the market in the medium term, which is why many instruments are showing similar trends. At present, a corrective wave sequence is unfolding as part of wave 4. If this assumption is correct, the instrument's decline may soon come to an end, as the structure has taken on a classic three-wave form.

It is important to note that a lot in the currency market now depends on Donald Trump's policies—not just trade-related ones. While positive news occasionally comes out of the U.S., the market remains preoccupied with broader uncertainty in the economy, conflicting decisions and statements from Trump, and the generally hostile and protectionist stance of the White House. As a result, the dollar must work hard to convert even favorable news into actual market demand.

The GBP/USD pair declined again by several dozen basis points on Wednesday. As previously noted, strong U.S. GDP and labor market reports have increased demand for the dollar. This upward movement in the dollar and the corresponding decline in GBP/USD remain fully aligned with the current wave pattern, which suggests a corrective wave sequence, as well as with the news background that continues to support sellers this week.

However, it is worth remembering that the FOMC meeting and Jerome Powell's press conference are scheduled for later today, with more important labor market and unemployment reports due by the end of the week.

The 3% growth in the U.S. economy is excellent news for the dollar. If the economy is expanding and the labor market is strengthening, the Federal Reserve has little reason to launch another round of monetary easing—especially amid rising inflation. The U.S. Consumer Price Index has increased over the past two months and is likely to continue rising in the near future. Therefore, the dollar is receiving significant support this week and currently appears more attractive than the euro, even in the months ahead.

Still, I see no reason to abandon the current wave structure just yet.

That said, U.S. dollar demand could start to decline as early as this evening if Jerome Powell signals a readiness to resume monetary easing in September. Most futures market participants currently expect the next rate cut to happen in September. If the FOMC lowers rates twice before the end of the year (the base-case scenario), and Jerome Powell is replaced next year by someone more aligned with Trump, we could see further rate cuts—regardless of growth, inflation, or labor market performance. In that case, while the dollar has a strong near-term basis for growth, its long-term outlook remains less favorable. And, of course, no one knows what other surprises Donald Trump has in store for the world.

Key Takeaways

The wave pattern for GBP/USD remains unchanged. We are dealing with a bullish impulse segment of the trend. Under Donald Trump, markets may face numerous shocks and reversals, which could seriously impact the wave structure—but for now, the working scenario remains intact. The targets for the upward trend are currently located near the 1.4017 level. A corrective wave sequence is still unfolding as part of wave 4. Classic wave theory suggests it should consist of three waves, and we are currently seeing the development of wave C.

Core Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often subject to change.
2. If you're unsure about what's happening in the market, it's better to stay out.
3. There is never 100% certainty in market direction. Always use protective Stop Loss orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.