Factions within the Federal Reserve exert pressure on the dollar, coupled with the divergence of policies between the UK and the US, causing the GBP/USD to dip and then rebound.

Tonghui Finance APP News—After falling for five straight days, the GBP/USD exchange rate shows signs of stabilizing and rebounds from a nearby low around 1.3155, regaining the 1.3200 level during the Asian session. Previously, the price had fallen to a nearly four-month low, mainly driven by the ongoing strengthening of the U.S. dollar and changes in risk sentiment; however, the current rebound more reflects a technical correction.

From the geopolitical situation, the Middle East conflict remains the core driving factor in the current market. Although the U.S. has released signals that negotiations are making progress, it also emphasized that if an agreement is not reached, it will take tough measures against key energy infrastructure. This “calming down alongside threats” signal has intensified market uncertainty. Iran’s stance is relatively cautious, and diplomatic progress is still fragile, which suppresses market expectations for conflict de-escalation.

Against this backdrop, energy prices have stayed at elevated levels, lifting global inflation expectations and thereby strengthening market bets on tighter policy by the Federal Reserve. The market has already started to price in the possibility of future rate hikes, pushing the U.S. dollar index to refresh its year-to-date high and exerting clear downside pressure on the pound.

Some analysts noted: “Geopolitical risk is being transmitted to inflation expectations through energy prices, which then affects the path of monetary policy—an outcome that is unfavorable for risk-sensitive currencies like the British pound.”

Meanwhile, the pressure on the UK economy also cannot be ignored. Because the UK is relatively sensitive to energy prices, rising oil prices may further intensify inflation pressure and squeeze consumers’ purchasing power, thereby dragging down economic growth. Although the Bank of England has released signals that it could raise rates, amid a heavy burden on the economic outlook, market doubts remain about the feasibility of maintaining a sustained tightening stance.

From a market sentiment perspective, the current pound trend is caught in a tug-of-war between a “technical rebound” and “fundamental downside pressure.” On the one hand, short-term oversold conditions create a need for a rebound; on the other hand, a strong dollar and macro uncertainty limit the room for the rebound. Therefore, the market remains cautious about the prospect of a further large-scale rebound.

From a technical standpoint, at the daily level, GBP/USD is still generally in a downtrend. Prices have been moving within a downward channel; although there has been support and a rebound near 1.3150 in the short term, the trend has not yet reversed. Key resistance levels to watch above are in the 1.3250 and 1.3320 areas; if the price cannot break through effectively, the rebound upside will be limited. In terms of momentum indicators, the RSI has risen from oversold levels but remains in a weak range; the MACD is running below the zero axis, indicating that the short side still dominates. The current rebound phase occurs within an ongoing downtrend; in the short term it is mainly a choppy repair, and a trend reversal has not been confirmed.

Editor’s Summary

Overall, after touching a local low, GBP/USD has shown a technical rebound, but fundamentals remain bearish. Uncertainty in the Middle East boosts safe-haven demand for the dollar, while the UK economy faces energy shocks and a policy dilemma, leaving the pound without sustained upside momentum. Technically, the daily trend is still weak, and the four-hour rebound momentum is limited. Overall, in the short term the exchange rate is more likely to remain in a low-range sideways pattern, and investors should watch key resistance levels and shifts in macro data.

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Editor: Guo Jian