Insights 
VT 
The Pound Sterling maintains strength near 1.3650 against the US Dollar after news of a ceasefire between Israel and Iran. Despite Fed Chair Jerome Powell’s statement on the need to assess tariff impacts on inflation, the US Dollar underperforms, keeping GBP/USD in an upward trend.
The US Dollar Index struggles around the weekly low of 98.00 during Europe’s trading session. President Trump announced the effective truce and cautioned against its violation, but support for static interest rates couldn’t uplift the Dollar.
BoE Signals and Employment Surveys
BoE Governor Andrew Bailey noted a weakening UK labour market and suggested gradual interest rate decreases. Recent employment surveys indicate a job vacancy decline, with Indeed reporting a 5% drop in mid-June.
Persistent inflationary pressures are foreseen in the upcoming US PCE data, crucially influencing market dynamics. The GBP/USD remains bolstered as the EMA and RSI indicators point towards further strength, with 1.3750 as a potential resistance level.
Labour market health remains a fundamental economic indicator affecting currency valuations. The tight labour market and wage growth influence inflation and monetary policy, crucial for central banks like the Fed, whose objectives include employment and price stability.
The article discusses several key market movements and policy signals that have been shaping the GBP/USD currency pair. To unpack this, let’s look at what’s supporting Sterling and weighing on the Dollar, and what that tells us about how price action may unfold going forward.
Impact of Geopolitical Tensions and Market Dynamics
After the announcement of a ceasefire between Israel and Iran, we saw risk sentiment improve globally. Typically, when geopolitical tensions cool, demand for safe-haven currencies eases somewhat. That’s one reason why the US Dollar has been under pressure. It’s not that the Dollar lost its appeal entirely, but rather that the motivation to hold it just eased on a relative basis. We are also seeing that despite Powell’s recent reminders about the need to evaluate the inflationary effects of tariffs, the Dollar Index has stayed pinned near its weekly lows. This reflects a mismatch between concern and conviction – in other words, markets are hearing what the Fed is saying but aren’t yet incorporating that into pricing.
Trump’s public remarks on the ceasefire and his warning about its breach might have been expected to support the Dollar if geopolitical fears had escalated again. But with Treasury yields under pressure and the Fed leaning towards patience on rates, policy dynamics continue to provide a firmer basis for Pound strength rather than Dollar gains.
On the UK side, Bailey acknowledged pressures in the domestic labour market, namely fewer job postings and a general decline in hiring appetite. Indeed’s data showing a noticeable fall in vacancies aligns with that tone. However, this doesn’t necessarily mean the BoE is in a rush to slash rates aggressively. The emphasis appears to be on a drawn-out recalibration, where policy is adjusted little by little – a stance that can be supportive for Sterling in the near term, especially if contrasted with the Fed staying on hold for longer due to persistent inflation.
Looking at the price action itself, the recent behaviour of GBP/USD remains defined by steady upward momentum. Technical indicators like the EMA slope and RSI positioning still line up with some room to climb, possibly towards that 1.3750 area, though reactions near resistance should always be watched closely. With minimal Dollar strength to counterbalance, any mildly positive UK data or even neutral developments may be enough to keep buyers interested.
From our perspective, labour market fragility on both sides continues to matter a great deal. In the US, we expect core PCE inflation to show enough stickiness to complicate the Fed’s path forward. And since the American central bank is tasked not only with handling inflation but also with supporting employment, any surprising jump in jobless claims or wage deceleration could re-anchor rate cut bets. Sterling will benefit from that divergence, especially while rate differentials tilt even slightly in the UK’s favour.
Overall, the takeaway for macro-focused participants is clear: when two major central banks are hesitating, attention doesn’t just shift to economic readings – it zeroes in on who has more flexibility to move first, or at least, who appears more confident in their next step. Right now, even with some softness in jobs, the UK rates path remains a touch firmer than the US one, and that small edge matters.
