Pound Sterling (GBP) has hit its highest level in over three years, now trading at 1.3565. This rise follows encouraging data on economic activity, inflation, and PMI services. The strength of the GBP is partly due to this positive economic news, showing solid growth. It also comes from reduced uncertainty around a US-UK trade deal and less cautious statements from the Bank of England.

Weaker USD Trend

A weaker USD has also played a role in boosting the GBP. Analysts predict that the next resistance levels for the GBP will be at 1.3660 and 1.3750, while support is found at 1.3450 and 1.3330. What we’re seeing is a currency rising due to more than just positive feelings. The current rally in Sterling, now at 1.3565, follows a series of better-than-expected economic reports—showing activity levels, inflation trends that suggest strong consumer demand, and solid performance in the services sector. Together, these indicators show that the UK economy is resilient, which may support the GBP in the near to medium term. With signs of ongoing recovery, market expectations for soft monetary policy are decreasing. The recent tone from Bailey, while not overly aggressive, is seen by the market as a sign that the Bank of England is unlikely to lower interest rates soon. This shift has boosted confidence in GBP-denominated assets and the currency itself. Another factor is the generally weaker dollar. As Treasury yields decrease and US economic data appears mixed, demand for the dollar has dropped, allowing Sterling to rise with less resistance. Now that levels of 1.3660 and 1.3750 are visible, traders should pay attention. As these levels draw closer, profit-taking is likely to increase, while support remains at 1.3450 and 1.3330 where demand could stabilise any pullbacks. Traders will need to be more precise in their entries around these zones.

Positioning and Risk

Current positioning is slightly long, which means that any unexpected negative data or renewed calls from Powell for higher rates could test these limits. Weekly surprises from CPI reports or hawkish Fed Minutes might create opportunities that traders shouldn’t overlook. With decreased volatility in G10 FX, any breakout movements could happen suddenly rather than gradually. In this environment, using layered entries is more effective than committing all at once. Flexibility is crucial, especially with moves driven not only by domestic data but also by changing global rate expectations. Communication from the Monetary Policy Committee (MPC) will also be important. Even if nothing new is stated, the way it’s communicated matters. Traders should listen for mentions of wage growth or service inflation, as both factors are persistent and influence the Bank’s decisions. In short, as levels like 1.3750 come into play and the fundamentals only partially support the uptrend, a balanced approach is wise. Buying too aggressively risks chasing a move that’s already advanced. Waiting too long could mean missing opportunities near support. The pressure is building. Create your live VT Markets account and start trading now.

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