The Pound Sterling (GBP) hit a fresh three-year high against the US Dollar (USD) of 1.3630 on Tuesday after investors all around the globe sold their safe-haven trades following the announcement of a ceasefire between Israel and Iran. The ceasefire increased risk sentiment that caused the US Dollar Index (DXY) to sharply drop from Monday’s two-week high of 99.40 to about 98.13.
The GBP/USD pair extended Monday’s rally as geopolitical relief, upbeat UK macroeconomic data, and dovish comments from Federal Reserve officials fueled bullish momentum in the British currency.
Ceasefire Boosts Market Confidence
Reuters reports that Iranian state media confirmed a ceasefire after four waves of missile attacks, and US President Trump echoed the truce on Truth Social, urging both sides to honor it. Oil prices plunged 15% from recent highs, easing energy-driven inflation concerns in the UK and Eurozone and boosting demand for risk-sensitive currencies like the Pound and Euro.
UK Flash PMI Beats Expectations
UK economic data provided a boost to the Pound, as the S&P Global Flash PMI reported for June showed a broad-based recovery in private sector activity. The Composite PMI rose to 50.7, above expectations, with consistent growth in services and a slower contraction in manufacturing. New business volumes rose for the first time in six months. However, job cuts continued because higher employer social security costs forced firms to adjust to the labor market fears.
Monetary Policy
The Bank of England kept rates unchanged at 4.25% last week but struck a cautiously accommodative tone, with policymaker Megan Greene advocating a “gradual and careful” approach to easing amid lingering inflation and growth concerns. In contrast, a dovish pivot from the U.S. Federal Reserve has pressured the Greenback, as Fed Governors Bowman and Waller signaled support for rate cuts, possibly starting in July, due to softening labor conditions. Market expectations now reflect a 22% chance of a July cut and over 80% probability of a September cut, per CME FedWatch
GBP/USD Maintains Bullish Trajectory
The Pound Sterling has convincingly broken above the 1.3600 resistance level, finding its way back to the June 13 high of 1.3630, showing continued bullish sentiment. GBP/USD is above its 20-day EMA near 1.3500, indicating underlying positive price action. The 14-day RSI is at roughly 60, implying there may be further upside. For support, look at 1.3250, and for resistance, the next level to watch is 1.3750, the level from January 2022.
Conclusion
Future remarks from BoE Governor Andrew Bailey and Deputy Governor Dave Ramsden could be relevant to short-term GBP sentiment. In contrast, USD movements will be determined by upcoming data releases and congressional testimony from Fed Chair Jerome Powell, while markets are also focused on ceasefire updates and energy prices.
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