The GBP/USD pair is rising, meeting initial resistance at the nine-day EMA of 1.3501.

    by VT Markets
    /
    Jun 20, 2025

    Pound Stabilizes After Four-Week Low

    The GBP/USD rose for the second consecutive day, trading close to 1.3500 during Asian hours on Friday. The pair showed a bullish trend, with the 14-day RSI above 50. However, it remained below the nine-day EMA, indicating weaker short-term momentum. On Thursday, GBP/USD bounced back above 1.3450 after a dip near 1.3400. This movement occurred as US markets paused for a holiday, easing some pressure on the US dollar. The Pound stabilized after hitting a four-week low of 1.3383, gaining strength following the Bank of England’s rate decision. Geopolitical uncertainties added pressure on the pair, while the US Dollar continued to rise. The BoE’s choice to keep rates unchanged, influenced by rising oil prices and tensions in the Middle East, reflects a weakening UK labor market. This raises concerns about potential rate cuts, keeping the financial landscape in focus. Sterling’s slight recovery, spurred by the Thanksgiving lull and reduced USD buying, doesn’t necessarily signal renewed optimism about the UK economy. It seems more like a temporary release of pressure due to thin liquidity and lower market participation rather than a solid bullish outlook. The Bank of England’s decision to maintain rates was not surprising, but the cautious tone caught attention. The divide among policymakers highlights worries about wage growth and slowing hiring trends, which are starting to affect monetary policy. Interestingly, the increase in GBP/USD happened despite no policy changes, showing how quickly sentiment can shift when market activity is low.

    Brent Highlights Inflation Expectations

    The RSI remaining above 50 suggests continuing demand, but the failure to break above short-term averages dampens enthusiasm. This scenario indicates that traders have a slightly positive outlook but lack strong commitment—momentum appears weak. In short, the appetite for trading is careful, not aggressive. Brent prices remaining high have drawn attention to inflation expectations again, particularly in the energy market. While this typically supports rate-sensitive pricing, the BoE’s caution suggests that inflation alone may not warrant rate hikes, especially with the labor market softening. This brings discussions about potential rate cuts into sharper focus as we approach year-end. With GBP/USD hovering around 1.3500, a solid trading range is forming between 1.3400 and 1.3550. Breaks outside this range could encourage bolder trading, but as things stand, rallies are struggling to gain traction. For those monitoring the derivatives market, implied volatilities can be quite useful here. The demand for downside protection hasn’t surged, indicating that market participants are not anticipating drastic changes—at least, not yet. Still, there’s a notable lean toward GBP puts, particularly for shorter-term contracts. Recently, the yield gap between UK gilts and US Treasuries has narrowed, but this lack of correlation shows that broad dollar sentiment is still a major driver. GBP/USD seems to react more to external flows than domestic data. Caution is advised not to overemphasize BoE narratives unless they diverge significantly from expectations. The geopolitical backdrop adds another layer of complexity. While oil’s influence on headline inflation is significant, it seems that risk appetite is becoming more reactive rather than anticipatory. Movements in GBP/USD that align with oil price shifts tend to be temporary, fading quickly as larger macro themes come back into play. In terms of positioning, there is no strong evidence yet of a fundamental shift in sentiment. Commitment of Traders data shows that large speculative accounts are holding balanced positions, reducing both long and short bets slightly. This suggests that major players are taking a wait-and-see approach. As we enter December, quieter trading periods can lead to exaggerated price movements. This uncertainty promotes a focus on gamma flows and event-driven swings, with expectations for ranges to hold unless a significant catalyst shifts sentiment. That catalyst could come from NFP reports, inflation data, or unexpected central bank comments. The strategy here may be to trade around clear levels, observe shifts in implied volatility, and avoid getting caught up in broader macro narratives that aren’t currently influencing price action. Create your live VT Markets account and start trading now.

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