GBP/USD has extended its rally, reaching a new 2025 high of 1.2631 as weaker U.S. retail sales fueled expectations of a dovish Fed. The pound’s move above key Fibonacci resistance at 1.2571 suggests further upside potential, with immediate targets at 1.2648 (100-WMA) and 1.2767 (50% retracement of the 1.3434-1.21 decline). The daily cloud top at 1.2620 serves as a critical pivot—if the pair holds above this level, a push toward early December highs near 1.28 becomes increasingly likely. Key support levels include 1.2550 (Friday’s low), 1.2470 (10-DMA), and 1.2454 (cloud base).

Sterling’s bullish momentum is supported by improving UK economic data and shifting market positioning. Recent UK GDP, output, and services data have boosted confidence in the pound, while dovish U.S. PPI and retail sales have weakened the dollar. The unwinding of GBP shorts is another bullish factor, with speculative traders flipping to net-long positioning. With U.S. yields retreating and the Fed policy outlook becoming more dovish, the broader macro environment favors further GBP/USD gains.

Traders will closely watch UK employment and inflation data next week, which could further influence Bank of England rate expectations. If inflation remains firm, the case for delaying BoE rate cuts strengthens, supporting sterling. Meanwhile, the fading impact of Trump’s trade policies and a less aggressive tariff stance reduce USD demand. As long as GBP/USD remains above 1.2550, the near-term bias remains bullish, with a potential move toward 1.28 in the coming sessions.