The GBP/USD currency pair began June with renewed strength, climbing back above the 1.3550 level on Monday as deteriorating risk sentiment took a toll on the US Dollar (USD). A fresh bout of trade tensions, primarily spurred by the US administration’s aggressive tariff stance, sent shockwaves through global markets and spurred a broad-market Greenback selloff, allowing the British Pound (GBP) to regain critical ground.
The Bank of England (BoE) is also in focus this week, as investors position ahead of Tuesday’s Monetary Policy Report Hearings before the British Parliament, a potential catalyst for Sterling volatility. In this article, Vestronmix professionals walk readers through the topic step by step.
Greenback Pressured by Escalating Trade Tensions
The USD has been under pressure due to mounting trade frictions, particularly between the United States and China. Over the weekend, the US President unveiled plans to double steel import tariffs to 50%, marking a significant escalation in the ongoing US-China trade dispute.
The announcement, made during a speech to the United Auto Workers union, signaled a renewed hardline approach from the White House.
China swiftly responded to the US President’s accusations of non-compliance with earlier trade agreements reached in Switzerland in May. While the US President criticized China for allegedly delaying approvals for rare earth exports, Beijing rebutted the claims, accusing the US of violating the initial technology export terms by implementing new restrictions.
Despite White House officials suggesting progress in negotiations, market sentiment tells a different story; investors are clearly bracing for prolonged trade uncertainty.
This heightened geo-economic risk has translated into sustained downward pressure on the USD, which is often viewed as vulnerable in the face of protectionist policies. Notably, the US Dollar Index (DXY) slumped as risk aversion prompted capital to flow into safe-haven assets like Treasuries and precious metals, and away from the Greenback.
Pound Sterling Strengthens Ahead of BoE Testimony
On the UK side, the British Pound continues to enjoy support from monetary policy stability and improved economic sentiment. The BoE, which has adopted a more cautious yet resolute stance amid external volatility, is scheduled to present its latest Monetary Policy Report to Parliament on Tuesday.
Investors will parse the testimony closely for updates on inflation expectations, rate policy guidance, and the central bank’s take on external shocks like global trade disruptions.
The BoE’s recent pivot away from previously expected aggressive rate cuts has helped anchor GBP flows. Earlier in the year, markets were pricing in multiple cuts due to a soft economic outlook. However, the UK economic data in Q1 and Q2 exceeded expectations, and inflationary pressures have remained relatively contained, giving the BoE room to hold interest rates steady.
While the BoE is not expected to tighten policy in the immediate term, the central bank’s forward guidance and emphasis on data dependency could provide continued support for Sterling if Tuesday’s testimony leans hawkish or reiterates confidence in domestic economic resilience.
Technical Outlook: GBP/USD Reclaims Key Levels
From a technical analysis perspective, the GBP/USD pair has broken through significant resistance levels, confirming a shift in short-term market structure. After dipping in late May, the pair rebounded sharply and reclaimed the 1.3550 handle, a psychologically important barrier that had capped upside momentum previously.
The pair is trading well above both short-term trendlines and the 200-day Exponential Moving Average (EMA), which is trending upward near 1.2900. This structural support suggests that underlying momentum favors the bulls. On Monday, Cable rallied towards multi-month highs, approaching levels not seen in two years, a signal of increasing buyer conviction.
Key resistance now lies near 1.3620–1.3650, an area that previously rejected upside advances. A clean break above this region could expose 1.3750, with momentum-driven rallies not out of the question if risk appetite remains elevated and the USD continues to underperform.
On the downside, immediate support is located around 1.3420, followed by the 1.3300 area, where a confluence of prior lows and moving average support sits. A drop below those zones could signal a short-term reversal, but current fundamentals favor continued bullish pressure.
Conclusion
The GBP/USD pair’s strong rebound above 1.3550 underscores how global trade tensions and shifting policy expectations are reshaping currency market dynamics. The British Pound is gaining favor as the Bank of England maintains a cautious but stable monetary outlook, while the US Dollar suffers from growing trade-related uncertainty and waning investor confidence.
With a loaded week of central bank commentary and key economic data ahead, volatility is likely to remain high. For now, the path of least resistance appears tilted to the upside for GBP/USD, as the Greenback’s trade-related troubles continue to weigh on its performance and open the door for further Sterling gains.
