Gbp Usd Bullish Trend

Pound Sterling is currently softer, having decreased by 0.2% against the US Dollar, and is underperforming compared to the G10 currencies. The market is anticipating key data releases, with the Consumer Price Index (CPI) on Wednesday and the Bank of England (BoE) meeting on Thursday.

Expectations indicate that inflation will continue a softening trend while staying in the mid to low 3% range. The BoE is expected to keep rates unchanged but may communicate a neutral or dovish stance. Market forecasts suggest a 25 basis point hike by September and a cumulative 50 basis points by December.

GBP/USD has maintained a bullish trend, reaching multi-year highs above 1.36, despite momentum slowing. Support is noted below 1.3480, with resistance above 1.3620, and no major longer-term resistance until 1.3750.

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Sterling’s recent dip, now trailing its G10 peers, highlights a shift in market sentiment driven by upcoming macro-economic catalysts. We’re watching, in particular, how inflation data might shape the tone at this week’s Monetary Policy Committee (MPC) meeting. With headline CPI likely easing but staying stubbornly above the preferred 2% level, the pressure on the central bank’s policy path is tightening somewhat.

Expectations For Central Bank Policy

The forward curve implies the monetary authority is expected to hold rates steady for now. However, a downward bias in guidance would not overly surprise us, especially if Wednesday’s inflation print confirms a continued cooling. Markets are leaning towards a gradual cutting cycle kicking off in the late summer or early autumn, and current OIS pricing reflects that sentiment, anticipating a 25bp move before September ends and possibly 50bps by year-end.

Bailey and the Committee seem to be managing a delicate balance. On one hand, inflation remains above-target, and the strength in services inflation could delay any easing. But labour market softening and somewhat muted consumer demand do appear to be giving them space. Dovish commentary this week could be aimed at laying groundwork for a later pivot — not a dramatic one, but enough to prepare market participants for lower rates in H2.

On the technical side, cable’s recent strength has been built on a durable uptrend since March, but the steam is fading. The area around 1.3480 had been a dependable support during retracements, and it continues to attract bids. Meanwhile, resistance at 1.3620 has proven sticky, with little market interest seen beyond that zone, at least up to 1.3750. The lack of material resistance above that intermediate area makes it theoretically easier for the pair to advance, assuming momentum is reignited. But that is contingent on both US data and domestic macro inputs aligning favourably.

For position management in the near-term, we believe that the emphasis should lie in tracking UK data surprises. Stronger-than-expected inflation, particularly core and services, will likely delay the expected policy shift. That dynamic tends to be favourable for the local currency. From a risk perspective, markets may also react sharply to how rate expectations on both sides of the Atlantic evolve — particularly from the US side, because divergent moves there can amplify GBP/USD volatility even before local fundamentals come into play.

Considering the yield differential, it remains relatively compressed as both central banks inch closer to potential easing cycles. Rate spreads have started narrowing again after a brief spell of divergence, which may act as a dampener on sustained GBP appreciation from here without clear upside surprise from domestic data or a sharp dovish tilt from Powell’s camp.

We are watching positioning data as well, which suggests long GBP positions have built up among leveraged accounts and asset managers since May, which makes the pair vulnerable to sudden shifts if incoming numbers disappoint. That could lead to short-term unwinds and intraday volatility spikes. Any such moves would likely test key retracement levels, particularly around the aforementioned 1.3480 zone, and potentially deeper if key macro catalysts break unfavourably.

With event risk clustered over just a few sessions, risk-adjusted positioning and tight order levels will be essential. We’ve adjusted our intraday beta thresholds slightly tighter than usual, favouring limited directional exposure through options rather than directional spot trades where necessary. The next 72 hours carry outsized option gamma around the 1.3550-1.36 area, and we expect sharp-but-contained price action if CPI or the MPC surprise consensus. On the upside, a post-data retest of 1.3620 becomes more plausible if disinflation fails to accelerate. On the downside, a surprise dovish tilt likely pushes positioning towards 1.3420, where we’d expect initial support zones to hold barring a major miss.

Trade planning at this point benefits from taking a measured, event-responsive approach rather than front-running expectations. We’re factoring in how sticky core inflation metrics might constrain the Committee, and how the market digests forward-looking communication rather than the hold itself.

Dollar dynamics will also feed in, of course. A more defensive Fed tone could bolster Sterling on the crosses, even if domestic outlooks remain uncertain. Thus, relative positioning, particularly in GBP/EUR and GBP/JPY, may continue to offer smaller, cleaner expressions as risk premium in cable grows in the lead-up to Thursday.

Short-term derivatives volumes have ticked up ahead of CPI, with overnight implied volatilities reflecting heightened sensitivity — a jump to mid-8% levels over one week tenure suggests an awareness that the next few trading days could define momentum for at least the next month.

All the while, sentiment remains fragile, and with positioning increasingly skewed to one side, small surprises could trigger outsized repositioning.

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