The GBP/USD exchange rate increased to 1.3500, bouncing back from a low of 1.3369. This rise was partly due to comments from Federal Reserve Governor Michelle Bowman, who indicated a possible rate cut in July. In the UK, the Flash Services PMI rose to 51.3, while the US June S&P Global Manufacturing PMI was at 52. However, the Services PMI fell from 53.7 to 53.1. Middle East tensions added to market uncertainty as the US struck Iran’s nuclear sites, prompting Iran’s parliament to consider closing the Strait of Hormuz. Despite this situation, the White House is seeking a diplomatic solution. Iran responded with missile strikes on Israel and may take further actions soon.

Technical Analysis

GBP/USD’s upward trend encounters resistance at the 20-day SMA of 1.3508, aiming to challenge levels of 1.3550, 1.3600, and the year-to-date high of 1.3631. If the pair closes below 1.3500, a pullback targeting the 50-day SMA at 1.3399 may happen. Recently, the British Pound was particularly strong against the New Zealand Dollar. As GBP/USD approaches the 1.3500 mark, it’s evident that Bowman’s recent comments surprised the market, giving the pound a boost just when it seemed to stall. The market viewed her comments on a July rate cut as a necessary adjustment due to ongoing disinflationary pressures and mixed US economic signals. Consequently, we saw renewed interest in selling dollars, readjusting market positions ahead of the core PCE report. Meanwhile, a slight increase in UK services activity hints at some resilience, although it remains fragile. The Flash Services PMI’s rise above 50 indicates mild expansion, but it’s not significant enough to change monetary policy expectations. Nonetheless, the lack of further decline helped keep pressure on the pound limited. We have observed before that weaker US data combined with slightly positive UK figures tends to favor a short-term bullish trend in GBP/USD. How this unfolds will rely heavily on whether the Bank of England surprises markets in July or stays with a cautious approach.

Market Sentiment

Overall, market sentiment is shaky. Escalations in the Strait of Hormuz and the broader Gulf region are pushing up oil prices and affecting currency flows. Earlier, investors had sought safety in the US dollar, but Washington’s mixed signals between military action and diplomacy complicate this safe haven story. Initial reactions in oil and gold suggest many traders believe diplomacy will prevail—for now—though the risk of further retaliation keeps uncertainty alive. Currently, the upward path for cable appears stable, provided the pair stays above its short-term moving average. The 20-day SMA, now at 1.3508, is a vital threshold. We are closely monitoring it—if it breaks above this level, the pair could quickly test the 1.3550 level. Resistance levels above are at 1.3600 and the yearly high of 1.3631. Each level holds potential for increased volatility depending on market positioning towards month-end. If the price falls and cannot hold above 1.3500, it might shift market sentiment. In that case, attention will turn to the 50-day SMA at 1.3399. A break below this could prompt a reassessment of risk appetite due to selling pressures and a shift to safer assets. In other markets, sterling has performed well against the Kiwi, which seems intentional. There’s a clear policy divide and distinct growth prospects between the UK and New Zealand at this point. A growing trend is emerging to pair sterling’s strength against commodity-linked currencies facing pressure from declining global demand. We expect more traders to emphasize this cross-trade as macro themes evolve in July. The coming weeks will be crucial for determining continuing trends or reversals, especially as macro data from both countries coincides with geopolitical updates. While the general direction appears clearer, actual price movements will determine if current market positioning is correct—or if it needs adjustment. Create your live VT Markets account and start trading now.

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