Insights 
VT 
Pound Sterling has softened by 0.15% against the US Dollar. However, it outperformed relative to the G10 currencies.
Domestically, the CBI reported May’s sales figures showing a notable deterioration. The economic calendar remains sparse, with markets expecting a slim chance of a 25bps cut in June and pricing in 39bps of easing by December.
Gbp Usd Trend Analysis
The GBP/USD trend appears bullish, with recent movements hitting multiyear highs. Momentum indicators are aligned with this trend, and the RSI at 64 suggests potential for further gains, with near-term support at 1.35 and resistance at 1.36.
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Sterling Performance And Market Expectations
While the pound eased slightly against the dollar—down by 0.15%—it still held firm when measured against its G10 counterparts. That relative strength, even in light of the minor setback, provides some context for how Sterling is being treated within the wider currency field. One could interpret this relative outperformance as a measure of resilience, especially given the recent deterioration in UK retail activity, as indicated by the CBI’s latest data.
The CBI reported a pronounced soft patch in May’s sales—a sharp contrast with previous months. Although this domestic weakness might usually weigh on Sterling, the subdued economic calendar leaves traders focused on broader risk appetite and central bank commentary. At the time of writing, rate expectations point to just under 40bps of easing by the end of December, with a marginal possibility of a cut as early as June. Market pricing, however, suggests there’s no strong consensus forming just yet. These projections, while not absolute, help guide near-term rate-sensitive trades.
GBP/USD’s upward trend remains intact. Prices have been pushing into territories not visited in multiple years, with technical setups backing the move. We’ve noted that the RSI is currently sitting around 64—hovering below overbought territory—which still offers space for upward price extension before any technical exhaustion sets in. Support has taken shape around 1.35, and sellers could step in near resistance at 1.36, but moves through that ceiling would likely prompt a re-evaluation of targets. In our view, as long as momentum holds and external shocks are absent, the setup continues to favour those looking for upward continuation.
Rate-sensitive instruments will remain in focus here. Should expectations for Bank of England easing skew further into 2024, we’d anticipate that Sterling will continue to attract relatively more attention against its peers, particularly those with more aggressive easing paths or weaker high-frequency data. However, it’s essential to keep in mind that momentum does not guarantee trend persistence, and macro catalysts—particularly from overseas—could spoil the picture without much warning.
Volatility premia in rate derivatives may remain compressed given the thin immediate calendar. We should be mindful of potential repricings around any unscheduled speakers or geopolitical catalysts, particularly those that shift market-implied rate paths for the Fed. Elevated positioning may amplify short-term swings, which could open opportunity but also heightens event sensitivity. Short-dated options, in particular, could see spikes in implied vol around surprise data prints or hawkish commentary.
As always, one must be alert to how positioning in the rates and currency complex responds to subtle shifts in economic assumptions. Overreliance on technicals without checking macro assumptions risks one-sided exposure. And while carry remains a tailwind for Sterling in certain crosses, negative surprises on UK growth or inflation could quickly erode that cushion.
