The dollar broke down across the board last week and remains in a rough spot, despite the calmer tones so far this week. And GBP/USD is one of the charts that exemplifies that sentiment:
GBP/USD weekly chart
In a similar case to the EUR/USD here, the pair also broke above its own 200-week moving average (blue line) and cleared a key technical hurdle in the form of the 1.3000 mark. That is setting buyers up with a good platform to build on in order to extend the upside breakout from last week.
And in terms of key resistance hurdles, there are not that many in the way of a stronger push higher for the pair.
However, I want to emphasise that for now, it seems that traders are focusing much more on the dollar side of the equation. And in that lieu, they are honing in on the divergence between the BOE (who looks to be needing to raise rates above 6%) and the Fed (who may see reason to start pausing rate hikes).
That is also one reason allowing for the pound to keep stronger against the dollar. But just be mindful that in the case of the UK economy, higher rates may not necessarily translate to a positive factor for the pound. As mentioned from last week:
“Tighter financial conditions will weigh on the economy further and if inflation continues to stay on the high side, there is growing risks of a stagflation scenario. That will make it tough for the BOE to navigate a soft landing and as they continue to raise rates further, it increases the likelihood of a deeper downturn and possibly even something breaking in the economy.
For now, traders aren’t focusing too much on that but that is something worth considering that could limit sterling’s gains down the road.”