Sterling hits 3-year high vs dollar ahead of key test
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The British pound surged to a three-year high late Monday, with GBP/USD reaching $1.3440 amid broad-based dollar weakness. The movement marks a significant technical milestone for sterling and sets the stage for a critical week of data releases that could determine the near-term direction for both currencies.
Sterling’s rally was fueled by softening US inflation expectations, persistent uncertainty over the outcome of President Trump’s trade policies, and a lack of immediate catalysts for the dollar. The pound gained 1% on Monday, equivalent to a 160-pip move, breaking into levels not seen since March 2022 when markets were grappling with the early phases of global monetary tightening.
The strong advance builds on sterling’s earlier momentum this month, when it posted a 10-session winning streak — its longest in years. However, the durability of this uptrend faces imminent challenges as key US economic data loom. Investors are bracing for the release of US GDP figures, the Federal Reserve’s preferred inflation measure (PCE), and the critical nonfarm payrolls report later this week. Strong readings could revive dollar strength and trigger a corrective pullback in GBP/USD, while softer outcomes would likely reinforce the pound’s bullish momentum.
Monday’s session also saw other major currencies gain ground against the dollar. EUR/USD climbed 0.5% to $1.1420, while USD/JPY dropped over 1% to 142.00 from 143.89, underscoring a broader shift in sentiment against the greenback.
Technically, GBP/USD is now flirting with a potential double-top formation, with Monday’s peak aligning closely with highs recorded in late September. Early Tuesday trading saw the pair slip back below $1.34, suggesting initial resistance at these elevated levels. A sustained breakout above $1.3440 would open the door toward the next bull targets in the $1.3650–$1.3740 range, while a failure to hold above $1.34 could embolden dollar bulls to push the pair back toward key moving averages around $1.27.
In conclusion, sterling’s advance places it at a pivotal juncture. The next few sessions, dominated by US macroeconomic releases, will be decisive in confirming whether the pound can maintain its upward trajectory or whether a reversal is imminent as the dollar attempts to regain footing.
Sterling’s rally was fueled by softening US inflation expectations, persistent uncertainty over the outcome of President Trump’s trade policies, and a lack of immediate catalysts for the dollar. The pound gained 1% on Monday, equivalent to a 160-pip move, breaking into levels not seen since March 2022 when markets were grappling with the early phases of global monetary tightening.
The strong advance builds on sterling’s earlier momentum this month, when it posted a 10-session winning streak — its longest in years. However, the durability of this uptrend faces imminent challenges as key US economic data loom. Investors are bracing for the release of US GDP figures, the Federal Reserve’s preferred inflation measure (PCE), and the critical nonfarm payrolls report later this week. Strong readings could revive dollar strength and trigger a corrective pullback in GBP/USD, while softer outcomes would likely reinforce the pound’s bullish momentum.
Monday’s session also saw other major currencies gain ground against the dollar. EUR/USD climbed 0.5% to $1.1420, while USD/JPY dropped over 1% to 142.00 from 143.89, underscoring a broader shift in sentiment against the greenback.
Technically, GBP/USD is now flirting with a potential double-top formation, with Monday’s peak aligning closely with highs recorded in late September. Early Tuesday trading saw the pair slip back below $1.34, suggesting initial resistance at these elevated levels. A sustained breakout above $1.3440 would open the door toward the next bull targets in the $1.3650–$1.3740 range, while a failure to hold above $1.34 could embolden dollar bulls to push the pair back toward key moving averages around $1.27.
In conclusion, sterling’s advance places it at a pivotal juncture. The next few sessions, dominated by US macroeconomic releases, will be decisive in confirming whether the pound can maintain its upward trajectory or whether a reversal is imminent as the dollar attempts to regain footing.