As political uncertainty in the UK eases, the pound continues its rebound against the dollar.
2026-07-09 13:17:52
The pound continued its rebound against the dollar in Asian trading on Thursday, trading around 1.3400 . The pound received some support, driven by a significant easing of domestic political risks in the UK, but the dollar's strength, influenced by safe-haven inflows and the Federal Reserve's cautious policy stance, limited the pound's upside potential.
British politics has recently undergone significant changes. With former Prime Minister Keir Starmer announcing his resignation at the end of June, previous market concerns about political uncertainty have gradually eased. The ruling party officially launched its election process for a new leader on July 9th , and it is widely expected that leading candidate Andy Burnham will assume the premiership around July 20th . This suggests that the future policy direction of the British government is becoming clearer, improving market risk appetite and providing some support for the pound.
However, the US dollar also received fundamental support. The Federal Reserve released the minutes of its June monetary policy meeting, the first meeting minutes since Chairman Kevin Warsh took office. The documents showed that there were still significant disagreements within the Federal Open Market Committee regarding the future direction of interest rates. The minutes indicated that some officials believed the federal funds rate should remain in its current target range or slightly below its current level until the end of the year , showing that some policymakers were beginning to focus on the risks posed by slowing economic growth; meanwhile, other officials believed that interest rates should be higher than their current level by the end of the year because inflationary pressures had not yet fully subsided, requiring a longer period of restrictive monetary policy.
This result indicates that the Federal Reserve's future policy path remains highly dependent on economic data, particularly inflation, employment, and consumer spending. Market expectations for a rate cut or hike this year have not reached a consensus, thus keeping the dollar relatively stable. Meanwhile, the situation in the Middle East has once again become the focus of the market. The US recently launched another airstrike on targets in Iran, followed by retaliatory actions from Iran against targets in Bahrain, Kuwait, and Qatar, rapidly escalating tensions in the Persian Gulf region. Market surveys show that the US's previous military actions against Iranian military facilities and port targets, coupled with Iran's continuous countermeasures against targets in the Gulf region, have significantly increased market risk aversion.
As geopolitical risks escalate again, international capital continues to flow into traditional safe-haven assets such as the US dollar, keeping the dollar index relatively strong and weakening the upward momentum of the pound against the dollar. Meanwhile, concerns about global energy supply are keeping international oil prices high, and renewed market anxieties about the global inflation outlook are further increasing the likelihood that the Federal Reserve will maintain a cautious policy stance.
Overall, the core factors currently influencing the GBP/USD exchange rate mainly include three main themes: the improved political environment in the UK, the outlook for Federal Reserve policy, and geopolitical risks in the Middle East. Among these, the stabilizing political situation in the UK helps improve market confidence in the UK economic outlook, while the US dollar benefits from safe-haven inflows and resilient interest rate expectations. The interplay of these two forces keeps the exchange rate fluctuating at high levels in the short term.
From a daily chart perspective, the GBP/USD pair remains near its medium- to long-term moving averages, maintaining an overall bullish trend. The MACD is above the zero line, with the two lines maintaining a golden cross , indicating that the medium-term uptrend remains intact. However, the red momentum bars have shortened, reflecting a marginal slowdown in bullish momentum. If the exchange rate breaks through the 1.3425 resistance level, it may further test the 1.3480 area. On the downside, key support areas to watch are 1.3330 and 1.3265 ; a break below these levels could trigger a deeper correction.
From a 4-hour chart perspective, the GBP/USD pair maintains a slightly bullish bias in the short term, with the price trading above short-term moving averages. The MACD remains above the zero line , but the momentum bars are narrowing, indicating a weakening of short-term buying power. If the UK political situation remains stable and the demand for the US dollar as a safe haven cools, the exchange rate is expected to break through 1.3425 and further challenge 1.3480 . If the situation in the Middle East continues to deteriorate, driving the US dollar higher, the exchange rate may fall back to test support around 1.3330 or even 1.3265 . Short-term movements will continue to be influenced by both geopolitical factors and expectations regarding Federal Reserve policy.
Editor's Summary : Easing political risks in the UK have provided some support for the pound, but significant disagreements within the Federal Reserve regarding the interest rate outlook, coupled with escalating tensions in the Middle East driving safe-haven flows into the dollar, have limited the pound's upside potential against the dollar. In the short term, the exchange rate will continue to fluctuate around the formation of the new UK government, Fed policy signals, and developments in the Middle East. If the UK political transition proceeds smoothly and market risk appetite improves, the pound is expected to strengthen further; conversely, if risk aversion continues to rise, the dollar's advantage may widen again, and the pound may face downward pressure against the dollar from its highs.
British politics has recently undergone significant changes. With former Prime Minister Keir Starmer announcing his resignation at the end of June, previous market concerns about political uncertainty have gradually eased. The ruling party officially launched its election process for a new leader on July 9th , and it is widely expected that leading candidate Andy Burnham will assume the premiership around July 20th . This suggests that the future policy direction of the British government is becoming clearer, improving market risk appetite and providing some support for the pound.
However, the US dollar also received fundamental support. The Federal Reserve released the minutes of its June monetary policy meeting, the first meeting minutes since Chairman Kevin Warsh took office. The documents showed that there were still significant disagreements within the Federal Open Market Committee regarding the future direction of interest rates. The minutes indicated that some officials believed the federal funds rate should remain in its current target range or slightly below its current level until the end of the year , showing that some policymakers were beginning to focus on the risks posed by slowing economic growth; meanwhile, other officials believed that interest rates should be higher than their current level by the end of the year because inflationary pressures had not yet fully subsided, requiring a longer period of restrictive monetary policy.
This result indicates that the Federal Reserve's future policy path remains highly dependent on economic data, particularly inflation, employment, and consumer spending. Market expectations for a rate cut or hike this year have not reached a consensus, thus keeping the dollar relatively stable. Meanwhile, the situation in the Middle East has once again become the focus of the market. The US recently launched another airstrike on targets in Iran, followed by retaliatory actions from Iran against targets in Bahrain, Kuwait, and Qatar, rapidly escalating tensions in the Persian Gulf region. Market surveys show that the US's previous military actions against Iranian military facilities and port targets, coupled with Iran's continuous countermeasures against targets in the Gulf region, have significantly increased market risk aversion.
As geopolitical risks escalate again, international capital continues to flow into traditional safe-haven assets such as the US dollar, keeping the dollar index relatively strong and weakening the upward momentum of the pound against the dollar. Meanwhile, concerns about global energy supply are keeping international oil prices high, and renewed market anxieties about the global inflation outlook are further increasing the likelihood that the Federal Reserve will maintain a cautious policy stance.
Overall, the core factors currently influencing the GBP/USD exchange rate mainly include three main themes: the improved political environment in the UK, the outlook for Federal Reserve policy, and geopolitical risks in the Middle East. Among these, the stabilizing political situation in the UK helps improve market confidence in the UK economic outlook, while the US dollar benefits from safe-haven inflows and resilient interest rate expectations. The interplay of these two forces keeps the exchange rate fluctuating at high levels in the short term.
From a daily chart perspective, the GBP/USD pair remains near its medium- to long-term moving averages, maintaining an overall bullish trend. The MACD is above the zero line, with the two lines maintaining a golden cross , indicating that the medium-term uptrend remains intact. However, the red momentum bars have shortened, reflecting a marginal slowdown in bullish momentum. If the exchange rate breaks through the 1.3425 resistance level, it may further test the 1.3480 area. On the downside, key support areas to watch are 1.3330 and 1.3265 ; a break below these levels could trigger a deeper correction.
From a 4-hour chart perspective, the GBP/USD pair maintains a slightly bullish bias in the short term, with the price trading above short-term moving averages. The MACD remains above the zero line , but the momentum bars are narrowing, indicating a weakening of short-term buying power. If the UK political situation remains stable and the demand for the US dollar as a safe haven cools, the exchange rate is expected to break through 1.3425 and further challenge 1.3480 . If the situation in the Middle East continues to deteriorate, driving the US dollar higher, the exchange rate may fall back to test support around 1.3330 or even 1.3265 . Short-term movements will continue to be influenced by both geopolitical factors and expectations regarding Federal Reserve policy.
Editor's Summary : Easing political risks in the UK have provided some support for the pound, but significant disagreements within the Federal Reserve regarding the interest rate outlook, coupled with escalating tensions in the Middle East driving safe-haven flows into the dollar, have limited the pound's upside potential against the dollar. In the short term, the exchange rate will continue to fluctuate around the formation of the new UK government, Fed policy signals, and developments in the Middle East. If the UK political transition proceeds smoothly and market risk appetite improves, the pound is expected to strengthen further; conversely, if risk aversion continues to rise, the dollar's advantage may widen again, and the pound may face downward pressure against the dollar from its highs.
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