The wave structure for GBP/USD continues to suggest the formation of a bullish impulse wave pattern. The wave picture is nearly identical to that of EUR/USD. Until February 28, we observed the formation of a clear corrective structure that left little doubt. However, demand for the U.S. dollar then began to drop sharply, ultimately leading to a trend reversal. Wave 2 of this new trend took the form of a single wave. Within the presumed Wave 3, Waves 1 and 2 have already formed. Therefore, we should now expect further strengthening of the pound as part of Wave 3 of 3 — which is precisely what we're seeing.

It's important to remember that much of the current activity in the currency market depends on the policies of Donald Trump. While positive news may come out of the U.S., the market remains focused on overall uncertainty, inconsistent decisions from Trump, and the White House's hostile and protectionist tone. As a result, it's difficult for the dollar to convert even favorable news into strong demand.

The GBP/USD pair rose by 30 basis points on Wednesday — not a dramatic move. In the first half of the day, we observed restrained declines, followed by a sharp rise after the U.S. inflation report. So, what exactly was in this report? In my view, there was nothing exceptionally important or unexpected. The market anticipated that the Consumer Price Index would accelerate to 2.9% year-over-year due to the tariffs implemented in recent months. However, inflation remained at 2.8% in May. Was this deviation so unexpected that U.S. dollar demand dropped by 50 points in a matter of minutes?

The market's forecast was only slightly off. No one expected a significant inflation surge — and indeed, it didn't happen. Core inflation rose to 2.4%, which is also not far from April's figure. However, I must point out one very important fact: at this moment, inflation trends appear to support President Trump in the Trump–Powell standoff. The president had warned that inflation would rise only modestly and temporarily. Jerome Powell, however, expects inflation to surge due to tariffs — which is why he and the entire FOMC are reluctant to resume monetary easing, a position that Trump finds highly frustrating.

Perhaps the latest inflation report will convince the Fed that inflation won't rise significantly. But for now, it is rising — and therefore, launching another round of monetary easing appears unjustified. This could have supported demand for the U.S. dollar — yet once again, the market ignored these "secondary factors."

General Conclusions

The GBP/USD wave structure has transformed. We are now dealing with a bullish impulse phase of the trend. Unfortunately, under Donald Trump, markets may continue to experience numerous shocks and reversals that defy wave structures and technical analysis in general. However, the current working scenario remains relevant. The upward wave 3 continues to build, with the nearest target at 1.3708 — which corresponds to the 200.0% Fibonacci level from the presumed global wave 2. Therefore, I continue to consider buying opportunities, as the market still shows no signs of reversing the trend.

On the higher wave scale, the wave pattern has shifted. We can now assume the development of a bullish segment of the trend, which at this stage appears incomplete. Further upside should still be expected.

My Key Analytical Principles:

1. Wave structures should be simple and clear. Complex formations are difficult to interpret and often lead to changes.
2. If there is uncertainty about what's happening in the market, it's better to stay out.
3. There is no such thing as 100% certainty about price direction. Always use Stop Loss orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.