Key Moments
- GBP/USD eased below 1.3600 in Asian trading after touching its highest level since May 11.
- Support for the US Dollar emerged from hawkish FOMC Minutes and ongoing US-Iran geopolitical tensions.
- Stronger UK inflation data sustained expectations for at least one quarter-point BoE rate hike before year-end.
GBP/USD Dips After Recent Highs
The GBP/USD pair traded with a slightly negative tone during the Asian session on Thursday, extending its pullback from the previous day’s peak, which was the highest level since May 11. In the latest trading, the pair slipped below the 1.3600 handle, although the broader fundamental picture still appears supportive for the British Pound and favors the prospect of dip-buying interest emerging on weakness.
Dollar Stabilizes After Yield-Driven Slide
The US Dollar found some stability after a sharp decline the day before, when US bond yields dropped and pushed the currency to a three-month low. That move in yields followed an announcement from the US Treasury Department that it would provide support to the bond market by at least doubling its purchases of longer-dated US government securities starting in September. The recovery in the greenback has acted as a drag on GBP/USD in the near term.
Hawkish Fed Minutes and Geopolitics Lend USD Support
Further downside in the Dollar has been contained by hawkish Federal Open Market Committee (FOMC) Minutes, which indicated broader support for additional rate hikes. These signals have been reinforced by persistent geopolitical risks linked to tensions between the United States and Iran over the Strait of Hormuz. In the latest development, US President Donald Trump stated on Wednesday that Washington will tighten economic measures against Iran. This backdrop has helped underpin the USD and limited GBP/USD gains.
Sterling Backed by Firm UK Inflation and BoE Expectations
The British Pound has drawn support from stronger-than-expected UK consumer inflation data released on Wednesday. The figures reinforced market expectations that the Bank of England could deliver at least one quarter-point interest rate increase before the end of the year. These policy expectations underpin a constructive view on GBP/USD and are likely to deter aggressive bearish positioning looking for a deeper correction.
Data and Fed Speakers in Focus
Market participants are now turning their attention to the upcoming US economic releases, including the Philly Fed Manufacturing Index and the regular Weekly Initial Jobless Claims. In addition, comments from key FOMC policymakers are expected to influence the US Dollar and, by extension, the GBP/USD pair. Developments on the geopolitical front also have the potential to inject further volatility into financial markets.
Technical Perspective on GBP/USD
From a technical standpoint, GBP/USD continues to trade above the 100-day Simple Moving Average (SMA), currently at 1.3427, reinforcing a constructive bias. This moving average is seen as the main structural support in the event of a corrective pullback. As long as spot remains above this level, the prevailing uptrend is viewed as intact, with scope for a retest of the May swing high near 1.3655.
US Dollar Performance Against Major Currencies This Week
The table below summarizes the percentage changes of the US Dollar against a basket of major currencies this week, indicating that the USD has shown the strongest performance versus the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.92% | -0.54% | -0.54% | -0.49% | -0.41% | -0.76% | -1.55% | |
| EUR | 0.92% | 0.53% | 0.41% | 0.43% | 0.47% | 0.17% | -0.62% | |
| GBP | 0.54% | -0.53% | -0.06% | -0.10% | -0.06% | -0.36% | -1.20% | |
| JPY | 0.54% | -0.41% | 0.06% | 0.04% | 0.05% | -0.24% | -1.06% | |
| CAD | 0.49% | -0.43% | 0.10% | -0.04% | 0.03% | -0.28% | -1.10% | |
| AUD | 0.41% | -0.47% | 0.06% | -0.05% | -0.03% | -0.30% | -1.13% | |
| NZD | 0.76% | -0.17% | 0.36% | 0.24% | 0.28% | 0.30% | -0.84% | |
| CHF | 1.55% | 0.62% | 1.20% | 1.06% | 1.10% | 1.13% | 0.84% |
The heat map should be read using the currency in the left-hand column as the base and the currency in the top row as the quote. For instance, selecting the US Dollar from the left column and moving across to the Japanese Yen cell provides the percentage move for USD (base)/JPY (quote).
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