Factions within the Federal Reserve exert pressure on the dollar, coupled with the divergence of policies between the UK and the US, causing the GBP/USD to dip and then rebound.

Tongtong Finance APP News—— After falling for five consecutive days, the British pound against the U.S. dollar showed signs of stabilizing and rebounded from a low near 1.3155, once again moving above the 1.3200 level during the Asian session. Previously, the exchange rate had fallen to a level close to a four-month low; it was mainly driven by the continued strengthening of the U.S. dollar and shifts in risk sentiment, while the current rebound reflects more of a technical correction.

From the perspective of the geopolitical situation, the conflict in the Middle East remains the core driver in the current market. Although the United States has released signals that negotiations have made progress, it also emphasized that if no agreement is reached, it will take tough measures against key energy infrastructure. This “signals of both de-escalation and threats” has intensified market uncertainty. Iran’s stance is relatively cautious, and diplomatic progress remains fragile, which has suppressed market expectations for easing of the conflict.

Against this backdrop, energy prices have stayed elevated, lifting global inflation expectations and thereby strengthening market bets on tighter policy from the Federal Reserve. Currently, the market has begun to price in the possibility of future rate hikes, pushing the U.S. Dollar Index to refresh its year-to-date high and placing clear pressure on the pound.

As one analyst noted: “Geopolitical risk is being transmitted to inflation expectations through energy prices, which in turn affects the path of monetary policy; this creates unfavorable conditions for risk-sensitive currencies such as the British pound.”

At the same time, the pressure facing the UK economy cannot be ignored. Because the UK is relatively sensitive to energy prices, rising oil prices may further aggravate inflation pressure and squeeze residents’ consumption capacity, thereby dragging down economic growth. Although the Bank of England has released signals that it may raise rates, amid pressure on the economic outlook, the market still has doubts about the feasibility of a continued tightening policy.

In terms of market sentiment, the pound’s current trend is caught in a tug-of-war between a “technical rebound” and “fundamental downside pressure.” On the one hand, short-term oversold conditions create demand for a rebound; on the other hand, a strong dollar and macroeconomic uncertainty limit the rebound’s room to run. Therefore, the market remains cautious about a further, sizable rebound.

From a technical standpoint, on the daily timeframe, the pound-to-dollar pair is still in a general downtrend. Price action has been moving within a downward channel; although it has found support near 1.3150 in the short term and rebounded, the trend has not yet been reversed. Key resistance levels to watch are 1.3250 and the 1.3320 area. If it cannot break through effectively, the rebound upside will be limited. For momentum indicators, the RSI has recovered from the oversold zone but is still in a weak range; the MACD is running below the zero axis, indicating that the bearish trend still dominates. Currently, this rebound phase is still within a downtrend; in the short term, it is mainly characterized by choppy, corrective recovery, and a trend reversal has not been confirmed yet.

Editor’s Summary

Overall, after testing the near-term low, the pound-to-dollar pair has seen a technical rebound, but the fundamentals remain bearish. Uncertainty in the Middle East increases demand for dollar safe-haven positions, while the UK economy faces an energy shock and a policy dilemma, leaving the pound without sustained upside momentum. From a technical perspective, the daily trend is still relatively weak, and rebound momentum on the 4-hour timeframe is limited. Overall, in the short term the exchange rate is more likely to stay in a low-level range-bound pattern, and investors should watch key resistance levels and changes in macroeconomic data.

(Editor: Wang Zhiqiang HF013)

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