GBP/USD Slips From 1.3770 as Dollar Rebounds on Fed Uncertainty and Sticky Inflation
Pound stalls at multi-year highs as U.S. data surprises, Powell exit rumors, and technical resistance tilt short-term risk lower | That's TradingNEWS
GBP/USD (GBPUSD) Faces Resistance Near 1.3770 as Dollar Rebounds on Core PCE and Trade Headlines
Sterling Surge Stalls Near 1.3770 After Core PCE Jump and Hawkish Sentiment Shift
The GBP/USD (GBPUSD) pair has retraced from its near four-year high of 1.3770, slipping below 1.3700 as stronger-than-expected Core PCE inflation and improved U.S. consumer sentiment revived demand for the U.S. Dollar. The May Core PCE rose 2.7% year-over-year, topping expectations and April’s 2.6%, raising concerns that the Fed may remain on hold longer. Monthly PCE also came in hotter, at +0.2% vs. +0.1% forecast. This data, combined with improving U.S. consumer sentiment—University of Michigan's sentiment index ticking to 60.7 from 60.5—put GBP bulls on alert.
Fed Watchers Eye Powell Replacement Rumors as Trump Signals Aggressive Shift
The dollar rebound was amplified by speculation that President Trump plans to replace Fed Chair Jerome Powell in the coming weeks, fueling rate-hike uncertainty. Markets priced out two rate cuts by year-end. This hawkish tilt came even as Personal Income and Spending data disappointed, with both rising just 0.1% in May, below expectations. Fed Governor Michael Barr’s remarks at the Cleveland Summit leaned neutral, but failed to stem dollar buying pressure driven by political risks and sticky inflation.
Sterling Supported by Political Clarity but Weighed Down by Current Account Risk
While Sterling (GBP) retains support from fiscal clarity under Prime Minister Keir Starmer, macro clouds hover. Rabobank flagged the UK’s fiscal overhang, citing "a heavy debt/GDP burden and worsening current account deficit". Nonetheless, GBP remains firm against other majors. Weekly performance charts show GBP gained 2.29% vs USD, and outpaced EUR (+0.06%), CAD (+1.65%), AUD (+0.68%), and NZD (+0.45%).
UK Data Sparse, But Sterling Rides Global Dollar Weakness and Technical Momentum
The rally in GBP/USD has been largely driven by dollar vulnerability, not UK macro strength. UK economic releases were limited this week, and despite a modestly better PMI print, forecasts for Q2 growth remain soft after a solid Q1. Technical momentum helped lift the pair, but resistance has clearly formed near 1.3750–1.3770, a zone last tested in October 2021. The pair struggled to decisively break above this barrier on multiple intraday attempts.
GBP/USD Technical View: RSI Overbought While SMA Supports Emerge Below
From a technical standpoint, GBP/USD maintains an upward bias but shows signs of stalling. RSI near 68 suggests limited room for continuation without a pullback. If the pair fails to hold 1.3700, it may retreat toward 1.3600, with further downside support at the 20-day SMA of 1.3561. A break below this line opens the door to the June 24 low at 1.3510. On the upside, a break above 1.3770 sets up a test of the psychological 1.3800 handle.
Trade Optimism with China and EU Offers Tailwind, But Month-End Flows Unpredictable
U.S. Commerce Secretary Lutnick confirmed the China-U.S. trade deal is finalized, while Bloomberg reported a potential EU-U.S. agreement by July 9. These developments supported the dollar midweek but were offset by speculation of Fed leadership changes and rising inflation. Month-end flows further complicated directional conviction. While Barclays suggested the dollar might strengthen into June close, broad sentiment leaned against it due to rate uncertainty.
GBP/USD Forecast: 1.3750 Resistance Key as Dollar Reasserts Control on Data and Politics
Despite a strong weekly gain, GBP/USD appears overextended. The lack of UK data and reliance on external U.S. factors make the rally fragile. A clear break above 1.3770 is needed to justify bullish continuation. Without that, the balance of risks favors consolidation or downside toward 1.3560–1.3600 range.
Buy/Sell/Hold Verdict: Hold GBP/USD Unless 1.3770 Breaks with Volume—Risk Skew Turning Bearish
Given the strong resistance zone, overbought technicals, and renewed U.S. dollar strength from inflation surprises and Powell replacement rumors, GBP/USD = Hold. Only a decisive close above 1.3770 with strong volume would shift the bias to bullish. Otherwise, the path of least resistance is a correction back toward support at 1.3600, with further tests possible at 1.3510.
