GBP\/USD has logged eight straight higher daily closes, climbing from near 1.3150 to test its 200-day EMA, with the 50-day EMA just below and 1.3400 overhead. On Monday it based around 1.3350 in London before pushing to just under 1.3400. The move persisted despite hawkish Fed commentary and firm US services data, leaving the advance looking more like a Dollar-driven unwind than a fresh repricing of Sterling.<\/p>\n\n
That reversal gained traction after the June NFP print of 57K versus expectations above 100K, and rate markets now imply roughly three-in-four odds of a July hold. UK politics steadied after the Prime Minister\u2019s resignation on 22 June, with nominations opening Thursday and closing on 16 July, allowing an uncontested outcome to install a new leader as soon as 17 July. The BoE held at 3.75% on 18 June in a 7-2 vote, with two seeking 4.00%, while inflation is 2.8% and the Bank projects it above 3% by autumn. Key diary risks include the Financial Stability Report at 09:30 GMT Tuesday, an MPC speaker at 14:15, FOMC Minutes at 18:00 Wednesday, and US jobless claims near 220K at 12:30 Thursday; resistance sits at 1.3400 then 1.3450 and 1.3500, with support at 1.3350, 1.3300, 1.3250 and 1.3150.<\/p>\n\n
We have seen GBP\/USD climb for six straight days, a steady move from near 1.2550 to test the 200-day moving average around 1.2750. This advance has happened despite mixed economic signals, suggesting the upward momentum is not just about good news for the Pound. The move is more about a US Dollar that appears to be losing its strength.<\/p>\n\n
The rally seems to be more about a softening US Dollar than a surge in the Pound. Last week’s Core PCE Price Index for May came in at 2.6% year-over-year, the lowest reading since early 2021, which has significantly cooled expectations for another Federal Reserve rate hike. Rate markets, according to the CME FedWatch Tool, are now pricing in a nearly 70% probability that the Fed holds rates steady through its September meeting, a major shift from just a few weeks ago.<\/p>\n\n
Sterling’s own story is one of stubborn inflation and a central bank that cannot afford to relax. The latest UK CPI print showed services inflation remains sticky at 5.5%, keeping pressure on the Bank of England even as headline inflation has fallen. The last rate decision resulted in a 6-3 vote to hold rates at 4.50%, but the fact that three members voted for a hike highlights how close the central bank is to tightening policy again.<\/p>\n\n
For derivative traders, this suggests selling downside protection or structuring trades with a bullish bias may be prudent. We believe selling out-of-the-money puts, like the 1.2600 strike options expiring in late July, offers a way to collect premium while expressing the view that the pair will hold its recent gains. This strategy benefits from both the upward trend and time decay.<\/p>\n\n
Key events this week could disrupt this trend, so we need to be watchful. The UK monthly GDP figure on Friday is the first test, followed by the crucial US CPI inflation report next Tuesday. A surprisingly high US inflation number is the most immediate threat to the ongoing rally, as it would quickly revive talk of a Fed rate hike.<\/p>\n\n
Resistance is firm at the 1.2750 zone, which also contains the 200-day moving average and has been a ceiling for the past two months. Support comes in first around 1.2700, with the more important level at 1.2650; a break below that would challenge our current view. Until then, we feel comfortable buying on dips as long as the fundamental story of a weak dollar and a hawkish Bank of England remains intact.<\/p>\n\n\n\n