GBP/USD Primed for Breakout as Trade Hopes Collide With Dollar Fatigue
Sterling flexes muscle against a wilting greenback—trade deal optimism meets classic USD weakness in a perfect storm.
Why it matters: When the dollar coughs, forex traders catch a cold. This time, GBP traders might just cash in.
The setup: Brexit ghosts fade as trade talks progress, while the Fed’s dovish tilt leaves dollar bulls scrambling. Technicals scream bullish—key resistance levels look ready to crumble.
Bottom line: Another case of ’buy the rumor, sell the news’—or will pound traders actually get paid this time? (Spoiler: Wall Street still takes its cut either way.)
GBP/USD Approaches Three-Year High on Renewed Optimism
Last week, the GBP/USD exchange rate surged above the 1.34 handle, marking its highest point since late 2022. However, the pair eventually eased back, closing the week slightly below that milestone. The key resistance level to watch remains 1.3440, a mark not breached since September last year.
Interestingly, the British pound’s strength has come despite continued signs of weakness in the UK economy. Recent data, including the Confederation of British Industry (CBI) retail sales index, revealed a sharp rebound: improving from -41 in March to -8 in April, the best reading since October 2024. This indicates some resilience among consumers, even amid broader economic malaise.
Dollar Weakness and Trade Deal Hopes Lift Sterling
The pound’s rally has also been amplified by softness in the US dollar, which continued its downward trajectory this month. Contributing to sterling’s upside was positive sentiment from Washington, where the Trump administration indicated that talks on a US-UK trade agreement were making “good progress.” Additionally, Trump’s push for tax cuts in an upcoming reconciliation bill added to the risk-on tone favoring the pound.
As a result, GBP/USD has gained more than a cent against the dollar and looks poised to finish April with strong momentum. Among major currencies, the pound has been outperforming, even besting the Euro and commodity-linked currencies like the Australian and Canadian dollars.
BoE Expectations Provide Additional Tailwind
Another key driver of GBP strength is shifting expectations around Bank of England (BoE) policy. While markets still price in around 87 basis points of easing by the end of 2025, there is growing belief that the BoE may not be as dovish as initially thought. This evolving view has helped sustain upside pressure on the pound.
Should buyers manage to break cleanly above the 2024 high at 1.3440, it would open the path toward 1.3500 — a psychologically significant level that hasn’t been tested since 2022. However, failure to hold above 1.3400 would likely see the pair retreat toward the 50-day Simple Moving Average (SMA), currently providing support around 1.3123.
Conclusion:
While hurdles remain, the GBP/USD pair remains biased to the upside, bolstered by political developments, a softer dollar, and recalibrated monetary policy expectations. A sustained break above 1.3440 could ignite a fresh leg higher, putting the pound in its strongest position in years.
