GBP/USD, DAX Forecast: Two trades to watch

GBP/USD falls ahead of key speeches from BoE's Bailey & Fed Powell

BoE’s Bailey & Catherine Mann speak
Fed Chair Powell testifies before Congress
GBP/USD falls for a 4th day

GBP/USD is falling for a fourth straight day, falling below 1.24 amid USD strength after Trump applied fresh trade tariffs and as the market looks cautiously ahead of key speeches from Bank of England policymakers Catherine Mann and governor Andrew Bailey and Federal Reserve chair Jerome Powell when he testifies before Congress.

The market will be particularly interested to hear what hawk-turned-dove Catherine Mann says after voting to cut interest rates by a larger-than-expected 50 basis points last week, a significant shift in position. Andrew Bailey could also provide hints about where the Bank of England could be heading with interest rates. The market is expecting this central bank to cut rates three more times this year after last week's 25 basis point reduction.

This is in stark contrast to the Federal Reserve, which may not cut interest rates this year. The Fed left interest rates on hold in January, with your Federal Reserve chair, Jerome Powell, insisting that the central bank was not in a rush to cut rates until the data showed it necessary.

Today, Jerome Powell will be following up on the appearance he testifies before the US Senate Banking Committee. The market will look for any further clear saver where rate cuts could be heading.

Powell’s appearance comes ahead of US CP data tomorrow.

GBP/USD forecast -technical analysis

After failing to retake 1.25 and the 50 SMA for a second time GBP/USD has corrected lower testing 1.2350 support, bringing 1.23 into focus. The pair is booking its fourth straight day of declines, suggesting the recovery from the 1.21 low has run out of steam.

On the upside, buyers need to rise above 1.25 to extend gains towards 1.26.

DAX hovers at record highs as trade tensions rise

Trump applied 25% tariffs to steel & aluminium
EC President said retaliatory tariffs will be applied
ECB President Lagarde sees disinflation continuing, but trade frictions pose a threat
DAX hovers just below 22k

The DAX and its European peers are trading largely flat on Tuesday after a record close in the previous session. Investors continue to assess the risk of an escalating trade war after President Trump raised tariffs on metals and the EU pledged retaliation. However, the prospect of further easing from the ECB is keeping stocks buoyant.

Trump applied 25% trade tariffs on steel and aluminium, up from his previous 10% rate. Basic resources in Europe are under pressure as European steelmakers account for around 15% of imports into the US. Shares of ThyssenKrupp and Salzgitter fell 1% each.

In retaliation, the European Union European Commission president Ursula von der Leyen said the EU will respond to any tariffs the US could impose on it, raising the risk of the transatlantic trade dispute.

Meanwhile, ECB president Christine Lagarde yesterday noted that disinflation continues to progress despite the risk of global trade friction. Lagarde sees growth in CPI returning to the central bank's 2% target this year but did warn of a challenging economic environment, as global trade frictions could make the inflation outlook more uncertain.

Attention will now turn to Federal Reserve chair Jerome Powell, who is due to speak later today. The market will look for clues about the Fed’s outlook for rates after the central bank left rates unchanged in January and said it was in no rush to cut rates.

DAX forecast – technical analysis

The DAX is hovering around a record high at 21,950 just a breath away from the next target of 22,000. However, the RSI is still in overbought territory which means a period of consolidation or even a move lower could be on the cards.

Support can be seen at 21,500, and below here, the price retenders the rising channel. Support is also at 21k. A break below 21k creates a lower low.

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