Sterling Targets Fresh Highs as Dollar Weakness

Key Moments

GBP/USD Holds Firm Near Recent Peaks

The GBP/USD pair is extending its upward bias at the start of the new week, trading around the mid-1.3600s and staying close to the peak reached on Friday, which marked its strongest level since February 11. The broader backdrop continues to favor buyers, supporting the view that the nearly one-month-long uptrend could persist.

Persistent selling in the US Dollar is a key driver behind the move. The Greenback remains pinned near its lowest level in more than three months, failing to mount a meaningful rebound and thereby providing a sustained tailwind for the British Pound.

Fed Expectations and US Yields Pressure the Dollar

Market participants have been paring back expectations for an immediate interest rate increase by the US Federal Reserve as signs of moderating price pressures emerge. This reassessment of policy prospects has weighed on the US Dollar.

Additional pressure on the currency followed last Wednesday’s announcement from the US Treasury that it would at least double buyback operations for long-dated government securities starting in September. That decision spurred a retreat in US bond yields, reinforcing the defensive stance of USD bulls and supporting the constructive near-term outlook for GBP/USD.

Geopolitical Risks Offer Some Support to the Greenback

Despite the prevailing bearish tone around the US Dollar, geopolitical developments could limit further losses. Tensions between the US and Iran are in focus as US Treasury Secretary Scott Bessent is scheduled to unveil what he has described as the “toughest sanctions in history” on Iran at a press conference on Monday.

In response, Iran’s Supreme National Security Council secretary, Mohsen Rezaei, warned that the country would cease all oil exports through the Strait of Hormuz and elsewhere in the Persian Gulf if the economic confrontation persists. Rezaei further stated that any country cooperating with US sanctions would be regarded as engaging in an act of war against Iran. These developments keep geopolitical risk premia elevated and could provide the US Dollar with some safe-haven support.

Oil-Linked Inflation Risks and Fed Path in Focus

Volatility in oil prices is feeding concerns about inflation, sustaining expectations for at least one Federal Reserve rate hike by the end of this year. This backdrop may discourage traders from adopting more aggressive bearish positions on the US Dollar and could act as a headwind for additional GBP/USD upside.

Attention now turns to upcoming US macro and policy signals. The release of the US Personal Consumption Expenditures (PCE) Price Index on Wednesday, followed by Fed Chair Kevin Warsh’s appearance at the Jackson Hole Symposium, will be closely watched. Investors are seeking further guidance on the Fed’s policy trajectory, which is likely to shape short-term USD dynamics and provide direction for the GBP/USD pair.

Technical View: Key Levels for GBP/USD

From a technical standpoint, GBP/USD is watching for a clear break and sustained move above the 1.3660 supply zone to confirm the next leg higher in the prevailing uptrend.

On the downside, any corrective pullback toward the 1.3600 level is expected to attract buying interest. Weakness is anticipated to remain contained near the 1.3570 support area, limiting the depth of any retracement.