GBP/USD Whipsaws Between Crash and Breakout as Pound Tests 1.3414
Sterling teeters near multi-week lows, but with inflation at 3.5% and the Fed on pause, is 1.3640 the next stop — or will dollar strength crush the rebound? | That's TradingNEWS
GBP/USD Pulls Back to 1.3440 as Legal Shocks, Sticky UK Inflation and Fed Caution Collide
Sterling Eases Off Multi-Year Highs While Greenback Finds Relief: Will 1.3600 or 1.3250 Break First?
GBP/USD has slipped to 1.3440 after peaking near 1.3593 just days earlier, as legal shocks from the U.S., sticky inflation in the U.K., and mixed Federal Reserve messaging send ripple effects across FX markets. Traders are now trapped between upside momentum that pushed GBP/USD 11% higher from its January 1.2100 low and the renewed strength of the U.S. dollar following a federal court ruling against Trump-era tariffs. The court decision, interpreted by investors as a de-escalation of trade tensions, propelled U.S. yields and equities upward, placing a short-term bid under the dollar.
Fed Meeting Minutes and U.S. GDP Cast Doubt on Rate Path: GBP/USD Traders Eye 1.3400 Support Zone
The FOMC minutes from the May 6–7 meeting emphasized a wait-and-see stance from the Federal Reserve. Policymakers voiced rising concern that inflation may persist longer than expected, while simultaneously highlighting the risks of tightening too quickly. The USD found support on legal clarity but faces downside if upcoming data — including Q1 GDP and Friday's PCE Index — signal cooling momentum. With GBP/USD near 1.3440, downside risks toward 1.3250 remain active if economic data miss expectations or if dovish Fed signals return.
U.K. Food Inflation Surges, Barclays Pushes First BoE Rate Cut Out to 2026
While the Bank of England contends with persistent inflation, the latest spike in U.K. food prices complicates policy expectations. CPI showed a fourth straight monthly rise in grocery costs, now driving core inflation to 3.5% YoY in April. Barclays now forecasts no interest rate cuts from the BoE until February 2026, anchoring sterling in the medium term. This inflation stickiness helped push GBP/USD to multi-year highs earlier in May, but without a broader shift in risk appetite or monetary clarity, the pair struggles to hold above 1.3500.
Sterling Rallies on Retail Sales and BoE Patience, But Political Uncertainty Clouds Upside
GBP/USD found strong footing last Friday after U.K. retail sales rose for a fourth consecutive month — the best performance in three weeks. The 0.89% intraday surge lifted GBP/USD to 1.35934, its highest level since early 2022. Despite this momentum, political risks remain. Market confidence in the U.K.'s ability to maintain its inflation-fighting resolve remains shaky, particularly with BoE Governor Andrew Bailey set to speak. Traders expect no major shift in June, but persistent inflation could reignite hawkish speculation.
GBP/USD Faces Critical Technical Levels: 1.3480 Resistance and 1.3400 Breakdown in Focus
From a technical perspective, GBP/USD remains fragile below 1.3500. The 1.3480 level acts as immediate resistance; reclaiming it may open the door to a retest of 1.3600. On the downside, failure to hold 1.3400 could trigger a drop to 1.3250. Despite a recent 11% rally from January lows, the pullback is consistent with normal retracements within a broader uptrend. The price remains vulnerable to headline risk from Fed speakers and U.K. data prints.
U.S. Tariff Policy and Memorial Day Flows Highlight Dollar Fragility
Trump's renewed tariff threats — including a proposed 50% tax on EU imports — only to renege days later, showcase the unpredictability of U.S. trade policy. Legal rulings blocking those tariffs initially sparked risk-on sentiment, but analysts warn that Section 122 or 301 could still be used to reimpose duties. Memorial Day trading saw thin volume, but GBP/USD still gained 0.18%, a signal that dollar weakness may not be wholly tied to domestic market liquidity. Broader anti-dollar sentiment could reemerge if Fed signals remain indecisive.
Buy, Hold or Sell GBP/USD: What's the Trade at 1.3440?
GBP/USD is in a tactical Hold zone near 1.3440 as the market awaits clarity from the U.S. GDP print and the BoE’s next moves. While the medium-term fundamentals favor sterling, technical momentum has slowed. Bulls should monitor 1.3480–1.3500 for re-entry with stops below 1.3400. Bears may look for a confirmed break below 1.3400 to open the path to 1.3250. Until then, the pair remains trapped in a consolidation that reflects broader indecision on both sides of the Atlantic. The next breakout direction hinges on macro data surprises and central bank rhetoric.
