The pound sterling continued to rise, supported by expectations of UK policy changes and bets on interest rate hikes, with GBP/USD continuing to climb.
2026-07-10 11:21:01
The pound maintained its strength against the dollar in early Asian trading on Friday, rising to around 1.3450, as the market assessed the impact of changes in the UK political environment, expectations for the Bank of England's monetary policy, and global risk sentiment on the pound's movement.
Recent political changes in the UK have become a significant factor influencing the pound. Markets are focused on the leadership transition within the ruling party, with Andy Burnham securing a majority of MPs' support in the leadership race and considered a strong contender for the next Prime Minister. Data shows that over two-thirds of MPs supported his candidacy, reinforcing market expectations for a smooth political transition in the UK.
Reduced political uncertainty typically benefits the performance of sterling assets, with investors believing that if the new government can maintain policy continuity, the UK economic outlook may improve to some extent. However, the market still needs to pay attention to the future direction of fiscal policy and how the government will address economic growth pressures. Meanwhile, expectations for further interest rate hikes by the Bank of England are strengthening. As tensions in the Middle East could drive up energy prices and increase global inflationary pressures, the market is again increasing its bets on the Bank of England maintaining a tight monetary policy. The market currently expects the Bank of England to raise interest rates by another 25 basis points before the end of the year , with the December meeting considered a potential point of adjustment.
Energy price risks have a significant impact on the Bank of England's policy path. If oil prices continue to rise due to geopolitical conflicts, it could slow the decline in inflation, forcing the Bank of England to maintain higher interest rates. This expectation provides support for the pound and drives a short-term rebound in GBP/USD. However, the safe-haven appeal of the US dollar still limits further gains for the pound. Recent renewed tensions between the US and Iran have raised market concerns about a potential escalation of regional conflict and its impact on global energy supplies. Related US military actions and Iranian responses have led investors to increase their allocation to safe-haven assets.
If risk sentiment deteriorates further, the US dollar may see renewed inflows, putting pressure on GBP/USD. Historically, during periods of heightened global risk events, the US dollar typically benefits from safe-haven demand, while higher-risk currencies and some non-dollar assets may come under pressure. Currently, GBP/USD is in a balance between policy expectations and safe-haven demand. On one hand, improved expectations for the UK political transition and anticipated Bank of England interest rate hikes support the pound; on the other hand, safe-haven demand for the US dollar and global risk events may still limit the exchange rate's upside.
From a daily chart perspective, GBP/USD has maintained an upward trend recently, currently trading around 1.3450, with bulls still holding a slight advantage. The moving average system shows the price remaining above short- and medium-term moving averages, indicating a strong trend structure. Resistance is seen at the 1.3480 area; a break above this level could lead to a further test of the 1.3500 level. Support is seen at 1.3380 and 1.3350; a break below these levels could lead to a pullback to around 1.3300. The MACD indicator shows that bullish momentum remains, but the pace of increase has slowed.
From a 4-hour chart perspective, GBP/USD is maintaining a consolidation trend after its short-term rebound, with the price finding support above 1.3400. Short-term moving averages continue to rise, indicating that buying pressure remains active. However, the current price is approaching a previous resistance zone, and a technical correction may occur if it fails to break through the resistance near 1.3450. The RSI indicator is in the bullish zone but not significantly overbought, suggesting further potential testing of higher levels in the short term.
Editor's Summary
The recent rise in GBP/USD has been primarily driven by improved expectations of a UK political transition and increased bets on a Bank of England rate hike. However, the market still faces uncertainties regarding safe-haven demand for the US dollar and geopolitical risks. In the short term, if the Bank of England continues to signal a tightening policy while the US dollar remains weak, the pound may continue to challenge resistance around 1.3500. However, if the situation in the Middle East escalates further, triggering a rise in global risk aversion, a rebound in the US dollar could suppress the pound's performance. Going forward, the market will focus on policy signals from the Bank of England, political changes in the UK, and developments in global risk events.
Recent political changes in the UK have become a significant factor influencing the pound. Markets are focused on the leadership transition within the ruling party, with Andy Burnham securing a majority of MPs' support in the leadership race and considered a strong contender for the next Prime Minister. Data shows that over two-thirds of MPs supported his candidacy, reinforcing market expectations for a smooth political transition in the UK.
Reduced political uncertainty typically benefits the performance of sterling assets, with investors believing that if the new government can maintain policy continuity, the UK economic outlook may improve to some extent. However, the market still needs to pay attention to the future direction of fiscal policy and how the government will address economic growth pressures. Meanwhile, expectations for further interest rate hikes by the Bank of England are strengthening. As tensions in the Middle East could drive up energy prices and increase global inflationary pressures, the market is again increasing its bets on the Bank of England maintaining a tight monetary policy. The market currently expects the Bank of England to raise interest rates by another 25 basis points before the end of the year , with the December meeting considered a potential point of adjustment.
Energy price risks have a significant impact on the Bank of England's policy path. If oil prices continue to rise due to geopolitical conflicts, it could slow the decline in inflation, forcing the Bank of England to maintain higher interest rates. This expectation provides support for the pound and drives a short-term rebound in GBP/USD. However, the safe-haven appeal of the US dollar still limits further gains for the pound. Recent renewed tensions between the US and Iran have raised market concerns about a potential escalation of regional conflict and its impact on global energy supplies. Related US military actions and Iranian responses have led investors to increase their allocation to safe-haven assets.
If risk sentiment deteriorates further, the US dollar may see renewed inflows, putting pressure on GBP/USD. Historically, during periods of heightened global risk events, the US dollar typically benefits from safe-haven demand, while higher-risk currencies and some non-dollar assets may come under pressure. Currently, GBP/USD is in a balance between policy expectations and safe-haven demand. On one hand, improved expectations for the UK political transition and anticipated Bank of England interest rate hikes support the pound; on the other hand, safe-haven demand for the US dollar and global risk events may still limit the exchange rate's upside.
From a daily chart perspective, GBP/USD has maintained an upward trend recently, currently trading around 1.3450, with bulls still holding a slight advantage. The moving average system shows the price remaining above short- and medium-term moving averages, indicating a strong trend structure. Resistance is seen at the 1.3480 area; a break above this level could lead to a further test of the 1.3500 level. Support is seen at 1.3380 and 1.3350; a break below these levels could lead to a pullback to around 1.3300. The MACD indicator shows that bullish momentum remains, but the pace of increase has slowed.
From a 4-hour chart perspective, GBP/USD is maintaining a consolidation trend after its short-term rebound, with the price finding support above 1.3400. Short-term moving averages continue to rise, indicating that buying pressure remains active. However, the current price is approaching a previous resistance zone, and a technical correction may occur if it fails to break through the resistance near 1.3450. The RSI indicator is in the bullish zone but not significantly overbought, suggesting further potential testing of higher levels in the short term.
Editor's Summary
The recent rise in GBP/USD has been primarily driven by improved expectations of a UK political transition and increased bets on a Bank of England rate hike. However, the market still faces uncertainties regarding safe-haven demand for the US dollar and geopolitical risks. In the short term, if the Bank of England continues to signal a tightening policy while the US dollar remains weak, the pound may continue to challenge resistance around 1.3500. However, if the situation in the Middle East escalates further, triggering a rise in global risk aversion, a rebound in the US dollar could suppress the pound's performance. Going forward, the market will focus on policy signals from the Bank of England, political changes in the UK, and developments in global risk events.
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