Pound Finds Lift from Dollar Slide but Faces Ceiling on UK Deficit Worries

1. Dollar weakness & tariff dynamics

The U.S. dollar trades near three-year lows (~–11% YTD) amid trade tensions and Fed rate-cut expectations. GBP receives a boost as it’s seen as less impacted by Trump’s new tariffs, rising ~0.3% to $1.3645 after recent announcements.

2. UK fiscal pressure & BoE positioning

The pound remains supported by its resilient trade deal status but is under strain from fiscal uncertainty. UK bonds sold off after government policy reversals raised deficit concerns (~5.7% of GDP), pressuring GBP. The BoE held rates at 4.25% in May, warning of tariffs’ impact, and markets now look to June inflation and GDP data

3. Technical & positioning

Cable trades between 1.3600 and 1.3650, with immediate resistance atop the range; support lies around 1.3550 and 1.3600. Momentum indicators show mild overbought readings—GBP may consolidate ahead of key UK data releases.

Summary: GBPUSD remains buoyed by USD softness and tariff immunity but capped by UK fiscal stress. A breakout above 1.3650 might target 1.3750, while a slip below 1.3600 could test 1.3500.

GBPUSD D1 Timeframe

The daily timeframe chart of GBPUSD shows price slowly sliding towards the 50-day moving average support. The touch of the moving average opens up possibilities of a rejection from other factors; the drop-base-rally demand zone, the trendline support, and the bullish SBR pattern are presented. Finally, the bullish array of the moving averages serves as an added confirmation of the likelihood of a bullish outcome on GBPUSD.

Direction: Bullish

Target- 1.37311

Invalidation- 1.33336

CONCLUSION

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