**GBP/USD Climbs Near 1.3470 During Asian Trading, Suggesting a Potential Test of Recent Highs**
*Adapted and expanded from the article published on VT Markets. Author: VT Markets Analyst Team.*
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The GBP/USD currency pair posted a notable rise during Asian trading, edging closer to 1.3470 and signaling the potential to challenge recent highs. This movement attracted substantial market attention, as it occurred amid a mix of economic data releases, central bank commentary, and shifting market sentiment. The following article provides an in-depth perspective on the underlying drivers behind GBP/USD’s current trajectory, the technical landscape, and the broader macroeconomic context that could shape its future moves.
## Overview of GBP/USD Recent Performance
– **Latest Movement**: During the Asian trading session, GBP/USD showed a firm bullish momentum, rising nearly 0.2 percent on the day and trading just shy of the 1.3470 resistance area.
– **Recent Highs**: The pair has been pushing against a key weekly barrier surrounding the 1.3475 region, an area that has repeatedly capped advances over the last several trading sessions.
Several factors have combined to fuel the current upswing in GBP/USD, and understanding these is crucial for traders seeking to capitalize on the pair’s volatility.
## Underlying Catalysts Behind GBP/USD’s Upswing
### 1. Optimism Over UK Economic Outlook
– **Rising Wage Growth**: The UK has recently published data indicating steady wage increases, which support consumer spending and domestic demand.
– **Uptrend in Inflation Expectations**: Despite previous easing, inflation expectations have firmed, prompting speculation that the Bank of England may maintain a tighter monetary stance for longer.
– **Positive Retail Sales**: Recent retail sales figures in the UK surpassed estimates, adding to the optimistic tone for sterling.
### 2. Bank of England Policy Signals
– **Hawkish Commentary**: Various BoE officials have suggested that interest rates may need to remain elevated to ensure inflation falls back to target.
– **Reduced Rate Cut Expectations**: Markets have pared back expectations for imminent rate cuts, pushing up the pound as yield differentials move in favor of the UK.
– **Central Bank Market Influence**: With the BoE maintaining a vigilant stance, GBP/USD has enjoyed tailwinds, especially as other central banks, such as the Federal Reserve, strike a more cautious tone.
### 3. US Dollar Weakness
– **US Data Misses**: Recent US macro releases, including softer-than-expected jobs and inflation data, have taken some shine off the greenback.
– **Federal Reserve Dovish Hints**: Clear signals from the Fed about potential future easing have contributed to broad-based USD weakness, aiding GBP/USD advances.
– **Yield Differentials**: The narrowing of yield differentials, especially as UK-Gilt yields hold up relative to US Treasuries, has underpinned sterling’s relative outperformance.
### 4. Shifts in Risk Sentiment
– **Global Markets Recovery**: Resurgent equities and improved risk tone have reduced safe-haven flows to the US dollar, sending traders into higher-yielding currencies like GBP.
– **Brexit Narrative Subsides**: Compared to previous years, Brexit has receded as a dominant risk, supporting a more straightforward assessment of sterling based on data and policy.
## Technical Analysis: GBP/USD Near Key Resistance
GBP/USD’s technical picture illustrates strong momentum with a test of critical levels on the horizon. Key observations include:
– **Short-to-Medium Term Trend**: The pair remains in an upward trend from the April 2024 lows, with successive higher highs and higher lows visible on four-hour and daily charts.
– **Resistance at 1.3470-75**: The 1.3470-75 band is a significant resistance level, previously serving as a turning point over multiple sessions.
– **Support Levels**: Immediate support
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