**GBP/USD Price Forecast: Sterling Gains Above 1.35 Amid Dollar Uncertainty**
*By TradingNews.com Staff Writer*
**Overview**
The GBP/USD pair has climbed above the psychologically important 1.35 level, driven by renewed sterling strength and a backdrop of US dollar uncertainty. This article examines the key factors influencing the move, technical levels to watch, possible scenarios in the coming weeks, and the broader macroeconomic drivers at play.
**Key Drivers Behind Sterling’s Gains**
Several intertwined developments propelled the pound higher against the US dollar:
– **Dovish Shift in the Federal Reserve:** Recent communication from the Federal Reserve has hinted at a slower pace of rate hikes. Concerns over US economic growth and rising expectations for an eventual policy pause have weakened the dollar against a basket of currencies, including the British pound.
– **Bank of England’s Hawkish Stance:** Contrary to the Fed, the Bank of England (BoE) has adopted a relatively hawkish tone. With inflation remaining stubbornly high in the UK, policymakers have signaled a willingness to raise rates further if needed to stem price growth.
– **Positive UK Economic Surprises:** Recent data releases, including robust employment figures and surprisingly resilient GDP data, have painted a more optimistic picture for Britain’s economy, supporting the pound.
– **Brexit Stabilization:** While Brexit headwinds have not entirely disappeared, a period of relative calm and progress on trade implementation have eased market anxieties surrounding the UK’s economic outlook.
– **Risk-On Sentiment:** Global equity markets have displayed renewed optimism, increasing investors’ appetite for riskier assets. The pound, traditionally considered a “risk” currency in comparison to the safe-haven dollar, has benefited from these flows.
**Dollar Softness and Increased Volatility**
The US dollar’s broad-based softness has played a major role in the GBP/USD rally:
– **Federal Reserve Policy Communication:** Market participants keyed in on recent Fed statements pointing to “data dependency” rather than pre-committed tightening. This flexibility has stoked speculation about a policy pause or pivot if the US economy slows further.
– **US Yield Curve Movements:** The spread between short- and long-term Treasury yields has narrowed, a traditional signal of weakening growth expectations and a potential harbinger of recession. Lower US yields reduce the dollar’s yield advantage and disincentivize capital flows into US assets.
– **Shifts in US Economic Data:** While inflation data remains elevated, some recent US economic prints (including softer consumer spending and a cooling labor market) have cooled expectations for future aggressive tightening by the Fed.
– **Global Risk Appetite:** The greenback’s role as a safe haven diminishes during risk-on periods. With market volatility subsiding and equities pushing higher, safe-haven demand for the US dollar has ebbed accordingly.
**Technical Analysis: GBP/USD Key Levels**
From a technical perspective, the GBP/USD pair’s breach above 1.35 is a significant development. Technical strategists are watching a few crucial levels:
– **Support Levels:**
– 1.3500 – Now serving as initial psychological support after the recent breakout.
– 1.3400 – The next key support zone, corresponding to previous resistance and a congestion area from earlier this year.
– 1.3240 – The February swing low represents a major downside barrier.
– **Resistance Levels:**
– 1.3650 – The next upside target, representing the March high.
– 1.3800 – Key resistance from January and the midpoint of the 2023-2024 trading range.
– 1.4000 – A major round number and the highest level seen since mid-2022.
Momentum indicators like the RSI and MACD are in positive territory, though signs of overextension suggest some short-term consolidation cannot be ruled out.
**Fundamental Analysis: Economic Outlook and Central Bank Policies**
The GBP/USD outlook is tightly linked
Read more on GBP/USD trading.