GBP/USD commenced the week at approximately 1.33785 and concluded near 1.34978, resulting in an approximate gain of 120 pips over the span of five trading days. The current price is positioned within a well-established short-term range, spanning from 1.34310 to 1.35430, with Friday’s closing value situated close to the upper boundary of this interval. The essential observation is that each decline toward the mid-1.34s drew in buyers, and the pair concluded the week challenging resistance instead of retreating into the center of the range. The observed behavior indicates that substantial capital and systematic trend strategies are building positions in GBP/USD during periods of weakness rather than opposing the upward movement. The current level around 1.34978 is significant as it returns GBP/USD to the same range it occupied in late August and September. During that period, the pair fluctuated around 1.36000 for several days, briefly reaching 1.37000 on 17 September before resistance limited the upward movement. The return of spot to this area, absent any significant UK macro surprises, highlights that the main influence is a weaker dollar rather than an exuberant repricing of sterling itself.
A consistent daily close above 1.35000 would reestablish the trajectory toward 1.36000, and should that area be surpassed, the previous spike high around 1.37000 emerges as the next plausible target in the medium term. The Bank of England’s policy rate stands at 3.75% following the recent cut; however, the specifics are more significant than the headline figure. The decision was reached with a narrow 5–4 split vote, indicating a lack of consensus within the Monetary Policy Committee, as a significant minority continues to advocate for maintaining elevated rates for an extended period. UK inflation, currently at 3.2% compared to the 2.0% target, continues to be a concern for a central bank that has faced criticism for its slow response earlier in the cycle. The interplay of persistent inflation exceeding target levels, a closely contested vote, and measured communication suggests that the BoE is not poised to embark on a rapid easing cycle. For GBP/USD, this indicates a favorable rate differential environment as long as market expectations lean towards the Federal Reserve implementing cuts more aggressively than the BoE throughout 2026. On the US side, preliminary GDP growth around 4.3% versus expectations closer to 3.2% confirmed that the real economy is still performing significantly better than many investors anticipated a few months ago. Typically, a performance exceeding expectations would lead to a tightening of financial conditions and provide the dollar with some foundational support. The US Dollar Index displayed a clear bearish weekly candle, closing close to its lows, indicating that positioning and narrative are dominating the underlying data.
Markets continue to reflect expectations of approximately two 25-basis-point cuts from the Fed in 2026, with investors seemingly prioritizing the trajectory of policy over the present robustness of economic activity. In such a scenario, a robust GDP report that fails to generate a lasting increase in the dollar serves as an indication that rallies in USD are being offloaded, which directly supports GBP/USD as a key anti-dollar pair. The movement in GBP/USD transpired under typical year-end circumstances, characterized by reduced liquidity due to the holiday schedule. That is significant as low volume can either amplify movements or render them unreliable. The verification is in alternative assets. WTI crude traded as high as roughly 58.73 before slumping back toward 56.65 by the Friday close, a textbook illustration of thin-tape intraday reversals. Silver surged over 17% this week and nearly 60% in the last five weeks, exhibiting a price trajectory that resembles a speculative frenzy rather than a systematic trend. In this context, GBP/USD progressed consistently and maintained its gains through the weekly close, avoiding a late reversal. The resilience enhances the quality of the movement: the rally is not merely a fleeting spike but a steady ascent backed by macro positioning and expectations regarding interest rates. The overall risk environment is also unfavorable for the dollar. The S&P 500 reached a new all-time high as the year concluded, indicating that equity investors are willing to embrace risk instead of retreating to cash reserves. Gold achieved new record highs and concluded the week near the upper end of its range. Silver, platinum, and palladium have experienced significant gains, reaching multi-year or all-time highs, indicating a strong influx of capital into metals as a strategy to hedge against inflation and currency fluctuations. In environments characterized by increasing equity prices and subdued volatility, the USD typically experiences depreciation as a funding currency, while higher-beta currencies such as GBP and AUD demonstrate stronger performance.
GBP/USD is following that narrative precisely: a softer dollar as the funding component, alongside a currency that continues to provide a positive real yield when factoring in inflation and policy rates collectively. The Bank of England’s Bank Rate is currently at 3.75%, indicating a real policy stance that is only slightly restrictive when compared to the inflation rate of 3.2%. Excessive cuts could potentially lead to a resurgence of price pressures and undermine credibility, particularly in light of political scrutiny and the persistently high cost of living in the UK. In contrast, the Fed is evaluated mainly based on the speed at which it transitions from restrictive conditions after reaching a cycle peak in rates. The prevailing market sentiment suggests that US interest rates are expected to decline more rapidly than those in the UK, thereby influencing the relative value positively for GBP/USD. Despite the absence of a thriving UK economy, a situation where the BoE gradually reduces rates while the Fed appears to be nearing an easing cycle maintains structural support for sterling against the dollar over a six- to twelve-month period. From a technical perspective, immediate support for GBP/USD is positioned within the 1.34310–1.34500 range. This aligns with the lower boundary of the specified short-term range and coincides with intraday demand that has emerged multiple times throughout the week. The weekly open around 1.33785 serves as a critical threshold: as long as the price remains above this level, the ongoing upward movement is preserved. On the upside, 1.35000 represents the clear psychological barrier currently under examination. A clean daily close above 1.3500, followed by intraday pullbacks that hold above that level, would suggest that buyers have absorbed the offers in that region and are poised to target the 1.36000 zone that capped price for much of late summer. A subsequent breach of 1.3600 would redirect attention to 1.37000, the peak observed in September, where trend followers and option structures are expected to reevaluate risk.