GBP/USD remains on a firm upward path, buoyed by diverging policy expectations between the Fed and BoE. The pair has now tested two-month highs, but the next moves will depend heavily on how this week’s central bank meetings play out.

Market Context

• The dollar is pressured by falling U.S. yields, reflecting anticipation of Fed easing.
• Sterling benefits from relatively tighter BoE policy expectations, though domestic fundamentals remain fragile with high inflation and weak growth.
• UK fiscal risks loom larger as the Autumn Budget approaches, with potential tax hikes adding to uncertainty.

Technical Landscape

• Immediate Resistance: 1.3621 is the short-term ceiling. If cleared, bulls will eye 1.3681 (July 4 peak) as the next significant resistance, followed by the 1.3787 multi-month high from July 1.
• Immediate Support: 1.3552 serves as first-line support. Below that, the rising 10-DMA at 1.3510 and the Ichimoku cloud top at 1.3464 provide strong secondary support.
• Momentum Signals: Daily RSI and stochastic oscillators show bullish momentum but with scope for consolidation. Bollinger Bands are widening, confirming volatility expansion.

Strategic Implications

Traders should watch Wednesday’s Fed outcome closely. A standard 25 bp cut may already be priced in, but a 50 bp cut or very dovish forward guidance could drive GBP/USD decisively above 1.3621 toward 1.3681. Conversely, if the Fed surprises with cautious language, GBP/USD may consolidate or retest 1.3510–1.3550. The BoE’s decision is unlikely to deliver fireworks but could reinforce sterling’s relative advantage if policy divergence with the Fed widens.