The pound is consolidating in a narrow range, with moving averages converging and awaiting a breakout; the focus is on Bailey's speech for guidance.
2026-05-21 14:39:52
On Thursday (May 21) during Asian trading hours, the pound sterling fluctuated moderately against the dollar, but remained near the weekly high reached in the previous session. The pair is currently trading around 1.3430, essentially unchanged for the day, with traders seemingly reluctant to make aggressive directional bets amid mixed signals regarding a potential US-Iran peace agreement.
US President Donald Trump said on Wednesday that negotiations between the US and Iran have entered the "final stage." US Vice President Vance also expressed optimism, saying Iran hopes to reach an agreement.
However, Trump subsequently warned that the United States would take further military action if Iran did not agree to a peace agreement, a statement that quickly dampened the initial optimism. Furthermore, significant differences remain between the two sides on Iran's nuclear program and the crucial Strait of Hormuz, and the geopolitical risk premium persists, providing support for the safe-haven dollar while limiting the upside potential of the pound against the dollar.
The minutes of the Federal Reserve's April 28-29 meeting showed that most policymakers believed further tightening of policy might be appropriate if inflation remained persistently above the 2% target. This reinforced market expectations that the Fed will raise interest rates by 25 basis points in 2026, becoming another factor supporting the dollar. This contrasts sharply with the recent weakening expectations of policy tightening from the Bank of England, further suppressing the pound against the dollar.
UK consumer inflation data released on Wednesday came in weaker than expected, prompting traders to postpone their expectations for the Bank of England's next interest rate hike to December. Data from the UK's Office for National Statistics showed that the overall CPI rose 2.8% year-on-year in April from 3.3% in March, below market expectations of 3.0%. Meanwhile, the UK unemployment rate unexpectedly rose to 5.0%. Against the backdrop of a deepening political crisis in the UK, these figures provide justification for the Bank of England to keep interest rates unchanged for the remainder of 2026.
Traders are currently focused on a speech by Bank of England Governor Andrew Bailey later in the US session for further guidance.
Meanwhile, preliminary PMI data from the UK and the US will also provide insights into short-term trading opportunities.
However, given the current fundamentals, a strong follow-through buying is needed before betting on a further rebound in the pound against the dollar from 1.3300 (the lowest point since April 8) hit on Monday.
In summary, the pound sterling is currently being pulled by multiple factors against the dollar: on the one hand, the progress and recurring nature of US-Iran negotiations perpetuate the geopolitical risk premium, providing support for the safe-haven dollar; on the other hand, the divergence between the Federal Reserve's hawkish stance and the Bank of England's dovish monetary policy further suppresses the pound. Cooling inflation, rising unemployment, and political uncertainty in the UK have collectively reduced the urgency for the Bank of England to raise interest rates.
In the short term, whether the exchange rate can continue its rebound will depend on the substantive progress of the US-Iran situation and subsequent policy signals from the Bank of England.
From the daily chart, the British pound is currently trading around 1.3430 against the US dollar, in a weak consolidation phase at recent lows, with multiple technical indicators showing neutral to weak signals.
(GBP/USD daily chart, source: FX678)
Regarding the moving average system, the short-term moving average MA20 (1.3507) is above the current price, forming short-term resistance; MA50 (1.3429) is roughly flat with the current price, and MA100 (1.3475) and MA200 (1.3422) are also near the current price. This arrangement of "multiple moving averages converging and the price repeatedly hovering around them" indicates that GBP/USD is at a critical juncture for directional choice, lacking a clear overall trend. It is worth noting that the price has repeatedly tested the 1.3500-1.3520 area since late April without a significant breakout, indicating strong resistance in this area; while the 1.3300 level below is a crucial support level in the near term.
At 14:39 Beijing time on May 21, the British pound was trading at 1.3432/33 against the US dollar.
US-Iran negotiations: Optimistic signals intertwine with military threats, supporting the safe-haven dollar.
US President Donald Trump said on Wednesday that negotiations between the US and Iran have entered the "final stage." US Vice President Vance also expressed optimism, saying Iran hopes to reach an agreement.
However, Trump subsequently warned that the United States would take further military action if Iran did not agree to a peace agreement, a statement that quickly dampened the initial optimism. Furthermore, significant differences remain between the two sides on Iran's nuclear program and the crucial Strait of Hormuz, and the geopolitical risk premium persists, providing support for the safe-haven dollar while limiting the upside potential of the pound against the dollar.
The Fed minutes were hawkish, and expectations for a Bank of England rate hike have weakened.
The minutes of the Federal Reserve's April 28-29 meeting showed that most policymakers believed further tightening of policy might be appropriate if inflation remained persistently above the 2% target. This reinforced market expectations that the Fed will raise interest rates by 25 basis points in 2026, becoming another factor supporting the dollar. This contrasts sharply with the recent weakening expectations of policy tightening from the Bank of England, further suppressing the pound against the dollar.
UK consumer inflation data released on Wednesday came in weaker than expected, prompting traders to postpone their expectations for the Bank of England's next interest rate hike to December. Data from the UK's Office for National Statistics showed that the overall CPI rose 2.8% year-on-year in April from 3.3% in March, below market expectations of 3.0%. Meanwhile, the UK unemployment rate unexpectedly rose to 5.0%. Against the backdrop of a deepening political crisis in the UK, these figures provide justification for the Bank of England to keep interest rates unchanged for the remainder of 2026.
Market focus: Speech by the Bank of England Governor and PMI data
Traders are currently focused on a speech by Bank of England Governor Andrew Bailey later in the US session for further guidance.
Meanwhile, preliminary PMI data from the UK and the US will also provide insights into short-term trading opportunities.
However, given the current fundamentals, a strong follow-through buying is needed before betting on a further rebound in the pound against the dollar from 1.3300 (the lowest point since April 8) hit on Monday.
Geopolitical risks and policy divergences are intertwined, keeping the pound under pressure in the short term.
In summary, the pound sterling is currently being pulled by multiple factors against the dollar: on the one hand, the progress and recurring nature of US-Iran negotiations perpetuate the geopolitical risk premium, providing support for the safe-haven dollar; on the other hand, the divergence between the Federal Reserve's hawkish stance and the Bank of England's dovish monetary policy further suppresses the pound. Cooling inflation, rising unemployment, and political uncertainty in the UK have collectively reduced the urgency for the Bank of England to raise interest rates.
In the short term, whether the exchange rate can continue its rebound will depend on the substantive progress of the US-Iran situation and subsequent policy signals from the Bank of England.
Moving averages are converging, indicating a potential breakout in direction.
From the daily chart, the British pound is currently trading around 1.3430 against the US dollar, in a weak consolidation phase at recent lows, with multiple technical indicators showing neutral to weak signals.
(GBP/USD daily chart, source: FX678)
Regarding the moving average system, the short-term moving average MA20 (1.3507) is above the current price, forming short-term resistance; MA50 (1.3429) is roughly flat with the current price, and MA100 (1.3475) and MA200 (1.3422) are also near the current price. This arrangement of "multiple moving averages converging and the price repeatedly hovering around them" indicates that GBP/USD is at a critical juncture for directional choice, lacking a clear overall trend. It is worth noting that the price has repeatedly tested the 1.3500-1.3520 area since late April without a significant breakout, indicating strong resistance in this area; while the 1.3300 level below is a crucial support level in the near term.
At 14:39 Beijing time on May 21, the British pound was trading at 1.3432/33 against the US dollar.
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