The British Pound (GBPUSD) extended its advance against the US Dollar (USD) on Wednesday, climbing above the 1.3400 mark. Investors are reassessing the Bank of England’s rate cut trajectory and digesting US macroeconomic data that continues to weigh on the greenback.
Fundamental Overview: Easing BoE Caution Meets US Softness
The Bank of England (BoE) cut interest rates by 25 bps last week but maintained a cautious tone, indicating that further easing would be data-dependent. Traders have slightly unwound aggressive rate cut expectations, supporting the Pound. Recent UK data, including services PMI and consumer confidence, remain mixed but do not justify aggressive dovish action, helping GBPUSD hold ground.
On the other hand, the US Dollar remains pressured as dovish Federal Reserve expectations continue to dominate market sentiment. Weak ISM Services and lower wage growth in recent NFP data have reinforced market pricing of at least one rate cut before year-end. US 10-year yields have softened, weakening the Dollar’s appeal.
BoE-Fed Divergence Still in Focus
The divergence in monetary policy between the BoE and Fed remains central to GBPUSD price action. While both central banks are leaning dovish, the Fed’s urgency appears greater, shifting the yield differential in favor of the Pound.
UK Economic Data Provides Mild Support to the Pound
Recent UK indicators particularly services PMI and wage growth have held up better than expected. While inflation has eased, strong wage dynamics keep the BoE cautious. This backdrop supports Sterling strength relative to peers like the US Dollar, especially as the Fed leans more clearly toward easing.
Broader Market Sentiment Favors Risk Assets Like GBP
Improving global risk sentiment amid fading US rate hike fears and stable oil prices is boosting appetite for higher-beta currencies like the Pound. Investors are rotating out of safe-haven flows, which previously benefited the USD, and reallocating toward risk-aligned assets including Sterling and equities.
Technical Outlook: Momentum Points to Further Upside
GBPUSD broke key resistance at 1.3360, now acting as support. The pair trades firmly above the 50-day EMA, with RSI near 60, signaling bullish momentum.
Immediate Resistance: 1.3430
Major Resistance: 1.3500
Support Levels: 1.3360 (recent breakout), then 1.3310
A sustained move above 1.3430 could open a path to 1.3500. However, if risk sentiment deteriorates or Dollar demand picks up, GBPUSD may pull back to test the 1.3360–1.3310 support zone.
Conclusion
The GBPUSD pair is showing a constructive bias, driven by a mix of technical breakout signals and relatively less dovish expectations from the BoE compared to the Fed. The upside may extend toward 1.3500 if upcoming US inflation data underwhelms and UK data remains steady. However, the pair remains sensitive to geopolitical and macro shifts, especially any surprise shifts in Fed rhetoric or UK economic surprises.
As long as GBPUSD holds above 1.3360, bulls maintain control.
