GBP/USD Rises as Softer Dollar Offsets UK Growth Concerns

Traders' Opinions

Summary:

GBP/USD rose toward 1.3390 on Tuesday as easing tensions between Israel and Iran weakened demand for the US Dollar. However, concerns over UK growth and political uncertainty continued to limit Sterling's upside despite expectations of a Bank of England rate hike.

BUY GBPUSD

EXP

TRADING

1.34001

Entry Price

1.36500

1.32900

1.33906 +0.00120 +0.09%

0.0

Pips

Flat

1.32900

Exit Price

1.34001

Entry Price

1.36500

The British Pound strengthened against the US Dollar on Tuesday, with GBP/USD climbing to around 1.3390 as improving risk sentiment weighed on the Greenback following confirmation that direct hostilities between Israel and Iran had ceased.

The easing geopolitical backdrop reduced demand for safe-haven assets, pressuring the US Dollar and providing support for major currencies, including Sterling.

The Pound also remained supported by shifting expectations for Bank of England policy. Markets, which previously anticipated interest rate cuts this year, are now pricing in a 25-basis-point rate hike before year-end as policymakers continue to grapple with persistent inflation pressures.

However, the move has failed to generate a stronger rally in Sterling. Investors remain concerned that higher interest rates may be implemented against a backdrop of weak economic growth and rising stagflation risks. Analysts at BBH argue that while tighter policy may help cushion the Pound, it is not necessarily a bullish development if economic activity continues to slow.

Political uncertainty has also weighed on sentiment after a series of government resignations weakened Prime Minister Keir Starmer's authority, encouraging investors to remain cautious toward UK assets.

Attention now turns to upcoming UK GDP figures and US inflation data, both of which could significantly influence expectations for Bank of England and Federal Reserve policy.

In my view, Sterling's gains are being driven primarily by Dollar weakness rather than confidence in the UK economy. While expectations of a Bank of England rate hike offer support, slowing growth and political uncertainty could limit further upside in GBP/USD.

Technical Analysis

From a technical perspective, GBP/USD remains positioned within a broader bullish structure despite recent corrective price action. On the 4-hour chart, the pair has successfully defended a rising trendline that has underpinned price since early April, suggesting that buyers continue to view pullbacks as opportunities to re-enter the market. The recent decline into the 1.3300–1.3315 support zone was met with strong buying interest, producing a bullish reaction from both horizontal support and trendline confluence. This rebound indicates that the underlying uptrend remains intact unless the pair begins closing decisively below this structural support region.

The 1.3300 area now represents the most important near-term support level. A sustained break beneath this zone would invalidate the current bullish recovery scenario and signal a deterioration in market structure. In such a case, sellers could target the next major support around 1.3180–1.3200, which previously acted as a significant demand area. A deeper move below this region would expose the broader uptrend to a more meaningful correction and potentially shift medium-term sentiment toward the downside.

On the upside, bulls remain focused on reclaiming the 1.3480–1.3490 resistance zone, which has repeatedly capped advances throughout late May and early June. This area represents the first major obstacle to a continuation higher. A sustained breakout above this barrier would likely trigger renewed bullish momentum and open the path toward the more significant resistance zone around 1.3635–1.3650, where multiple swing highs and previous rejection points are clustered. A decisive move through this upper supply zone would confirm a continuation of the broader bullish trend and could accelerate gains toward fresh multi-month highs.

Market structure currently favors buyers as the pair continues to produce higher lows while respecting the ascending trendline. The recent rebound from support suggests demand remains active, although confirmation of a larger bullish continuation requires a break above the 1.3490 resistance ceiling. Until then, price is likely to remain in a consolidation phase between support at 1.3300 and resistance at 1.3490.

While momentum indicators are not displayed on the chart, price action itself suggests that bearish momentum has begun to fade following the sharp decline from the May highs. The strong rejection from trendline support and subsequent recovery indicate improving buying pressure. However, traders should remain cautious until resistance is decisively broken, as failure to do so could result in another retest of the lower support zone.

TRADE RECOMMENDATION

BUY GBP/USD

ENTRY PRICE: 1.3400

STOP LOSS: 1.3290

TAKE PROFIT : 1.3650

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GBP/USD Rises as Softer Dollar Offsets UK Growth Concerns

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