The British pound has been showing impressive strength lately. On Monday, it briefly surged to 1.36 against the US dollar—its highest level in nearly 39 months—before retreating slightly on Tuesday to below 1.3550. Despite this short-term pullback, the broader technical outlook remains supportive of further gains.
Since the beginning of 2025, the pound has climbed more than 8% against the dollar, a notable rally. The recent peak at 1.3567 on May 26 reflects continued investor confidence in the UK’s economic fundamentals and monetary policy outlook. While the rally has been partly driven by a weaker dollar, market demand for the pound has remained strong. Looking at the average exchange rate this year of 1.2844 and the early-year low at 1.2177, the broader trend still leans upward.
From a technical perspective, GBP/USD is currently testing support near the 200-period moving average on the hourly chart. Although short-term momentum indicators like MACD and the Donchian Channel suggest some softness, the broader trend continues to favor the bulls. If the price dips below 1.3536, we could see more selling pressure in the short term. On the other hand, a break above 1.3584 could pave the way for a retest of this week’s high.
Looking ahead, the Fed’s monetary policy remains a key driver. If US economic data continues to underperform, the Fed may maintain its dovish stance, which would likely weigh on the dollar and support further pound strength. However, a surprise rebound in US data could stabilize the dollar and cap the pound’s advance.
In summary, while short-term corrections are part of the picture, the medium-term outlook for GBP/USD remains constructive. As long as the pair holds above 1.3530, the uptrend appears intact. But if that level breaks, investors should be prepared for a potential pullback. Staying attentive to key technical levels and keeping an eye on US data and Fed signals will be crucial in navigating the next moves.
