The British pound is currently trading at 1.3507, reflecting a decrease of 0.18% for the session after retreating from a daily peak of 1.3539. The currency is now engaged in a tight range contest between 1.3500 and 1.3600, influenced by three concurrent macroeconomic factors. March US retail sales showed a robust increase of 1.7%, surpassing the 1.4% consensus, which has significantly bolstered demand for the dollar. Kevin Warsh’s testimony during his Senate confirmation has introduced new hawkish sentiments into the Federal Reserve’s outlook. Additionally, the re-closure of the Strait of Hormuz, coupled with the seizure of an Iranian vessel, is driving safe-haven flows directly into the greenback. The recovery of Cable from the early-April lows around 1.3160 — a movement of approximately 440 pips to the recent swing high of 1.3599 on April 17 — has clearly stalled. The current market dynamics raise questions about the sustainability of the ascending channel structure and whether the prevailing dollar strength will disrupt it. The price movement in GBP/USD has been stabilizing within the range of 1.3500 to 1.3600 over several sessions, characterized by small-bodied daily candles that indicate a notable pause following the robust rebound from the lows observed in April. The pair reached a peak of 1.3539 earlier on Tuesday before retreating towards the 1.3500 level following the release of the US retail sales data. The ascending channel pattern that has characterized price action since March continues to hold, with the lower boundary of that channel positioned around 1.3500 — exactly where cable is presently located. A decisive move below 1.3500 would represent the initial significant structural impairment to the bullish framework that has prevailed since the early-April lows.
The 14-day RSI is currently at 59, indicating it is in positive territory yet not reaching overbought levels. This suggests that momentum can continue to develop in either direction without necessitating an immediate pullback. The pair remains positioned above the 9-period and 50-period Exponential Moving Averages, with the short-term EMA situated above the longer one — indicative of a favorable momentum alignment. However, the extended upper wicks on the latest daily candles indicate that buyers are losing confidence at the peak of the range. The level ladder for cable is outlined with meticulous accuracy. On the upside, immediate resistance is positioned at 1.3539 — Tuesday’s intraday high. Above that, the key resistance level is 1.3568, which buyers tried to overcome for four consecutive sessions late last week without achieving sustained acceptance. Beyond 1.3568 lies the 1.3590-1.3600 range that limited Friday’s advance, succeeded by the two-month peak of 1.3599 recorded on April 17. A break above 1.3600 paves the way to 1.3623, followed by the upper boundary of the ascending channel around 1.3750, and ultimately reaching 1.3869 — the highest level since September 2021, noted on January 27. On the downside, immediate support is positioned at the psychological level of 1.3500, followed by 1.3493 at the nine-day EMA, and then 1.3480, which serves as the ascending trendline pivot that buyers have successfully defended on two occasions. A sustained break below that confluence reveals the 50-day EMA at 1.3423. Below the 50-day, the next significant demand zone is positioned at 1.3400, followed by 1.3159, which marks the nearly five-month low from March 31. The ultimate structural floor is identified at 1.3010 — the lowest level since April 2025, recorded in November 2025.
The primary economic factor influencing Tuesday’s dollar demand was the March US retail sales, which recorded a 1.7% month-over-month increase, surpassing the consensus forecast of 1.4%. This represents a significant upside surprise, with February’s figure also revised upward to 0.7% from the previously reported 0.6%. The ex-auto component also surpassed expectations. The year-over-year growth of 4% indicates that the American consumer remains resilient, even in the face of a significant 24.1% increase in gasoline prices in March, attributed to the ongoing conflict in Iran. The data systematically undermines the argument for immediate Federal Reserve easing and strengthens the hawkish perspective that Warsh is presenting to the Senate Banking Committee. For GBP/USD, this dynamic translates directly — the advantage of the US interest rate differential over the UK expands whenever expectations for rate cuts on the dollar side diminish, which has just occurred. Federal Reserve chair nominee Kevin Warsh presented his opening testimony to the Senate Banking Committee on Tuesday morning, and the wording is critically significant for cable. He explicitly advocated for a revised inflation framework, contended that the Fed has strayed from its price-stability mandate, and expressed skepticism regarding the efficacy of forward guidance as a monetary policy instrument. Warsh separately indicated that if the Fed kept a smaller balance sheet, interest rates might structurally remain lower — suggesting an ongoing dedication to balance-sheet normalization efforts. The 2-year Treasury yield increased to a session high of 3.77%, rising by five basis points, while the 10-year stands at 4.288%. The data from CME Group indicates a greater than 56% likelihood that the Fed will maintain current rates until the conclusion of 2026, with nearly 40% chance that this hold could last until June 2027. That represents a significant shift towards a more aggressive stance. With US rates positioned at approximately 3.75%, the interest rate differential compared to UK rates close to 4.25% has decreased, yet it continues to support dollar-denominated carry trades during periods of heightened safe-haven flows. The overall setup indicates a lack of strength for GBP/USD in the short term.
The British data set presents a diverse array of information. The UK Unemployment Rate unexpectedly decreased to 4.9% in the three months leading up to February, contrasting with a consensus expectation of 5.2% — indicating a significantly stronger labor market reading than what was anticipated by market participants. However, beneath the surface, the growth in regular pay within the private sector that is pertinent to policy has decelerated to 3.2% year-over-year in February, down from 3.3% in January. The current wage growth rate marks the slowest since October 2020, and importantly, it falls short of the Bank of England’s Q1 forecast of 3.5%. BBH analyst Elias Haddad highlighted that the reduction in wage pressure provides the Bank of England with the opportunity to restart its easing cycle later this year. Additionally, he noted that expectations for rate hikes by the BoE are likely to shift back towards cuts due to the excess slack present in the UK economy. The Bank of England projects a negative output gap of -1% of GDP for the year 2026. The payroll data showed a decline while the unemployment rate decreased, creating a complex scenario — a reduction in the number of individuals actively seeking employment (partly due to fewer students entering the workforce), yet the fundamental hiring momentum has diminished. The current situation suggests that the BoE is unlikely to substantiate any rate increases and may need to consider reductions by the end of the year, which presents a structurally negative outlook for GBP in the medium term.