GBP/USD Sinks to 1.3401 as Fed Strengthens Dollar, BoE Wavers

GBP/USD Slides as Sterling Breaks Key Support While Fed Risks Mount

GBP/USD Retreats to 1.3401 After Repeated Rejections Near 1.3517

The GBP/USD pair has come under sustained pressure, falling to 1.3401 in North American trade after a sharp rejection at the 1.3517 resistance zone. The pair has now erased nearly 3% from monthly highs, with the bears actively attempting to break the yearly uptrend. Momentum has shifted firmly against the Pound after multiple failed tests of the 50-day EMA near 1.3493 and firm rejection at dynamic trendline resistance. With intraday closes below the 1.3462 zone, downside momentum is accelerating, exposing the pair to the next major support level at 1.3371/88, the June low and 61.8% retracement from the May rally. Below that, 1.3300 and 1.3143/76 become critical watch levels, representing the 100% extension of the July drop and the May LDC.

Dollar Strengthens on Solid Macro Data and U.S.–EU Trade Breakthrough

The broader pressure on GBP/USD stems from aggressive U.S. dollar strength, as the DXY Index climbed to 97.67, well above its short-term pivot at 97.52, helped by a confluence of bullish catalysts. U.S. PMI and jobless claims beat expectations, easing fears of recession. Despite a 9.3% decline in headline Durable Goods Orders, the core data showed ongoing resilience in manufacturing. The 10-year Treasury yield holding near 4.39% underscores investor confidence in the U.S. macro story.

Optimism surged further after the U.S.–EU trade deal, which imposes 15% tariffs on EU goods but secures broader cooperation, removing key uncertainty. GBP reacted negatively to the deal, especially with risk flows favoring the dollar ahead of major U.S. data this week: GDP, ISM Manufacturing, and Friday’s NFP report.

Markets Brace for Fed Decision While Political Pressure Mounts on Powell

All eyes remain on the Federal Reserve’s July 31 meeting, with futures pricing in a 63% chance of a rate cut in September. Chair Powell’s press conference will be scrutinized for language signaling forward policy direction, especially after President Trump’s rare visit to the Fed and his public call for lower rates. Despite political noise, the central bank is expected to hold at 4.50%, although uncertainty is brewing about the Fed’s independence through 2026 given persistent interference risks.

The current resilience of the greenback reflects not only rate differentials but also growing confidence in the U.S.’s ability to sustain GDP growth through Q3, despite inflation still needing close management.

Bank of England Under Pressure as Inflation Persists but Momentum Fades

Sterling’s underperformance has been amplified by shifting expectations around the Bank of England. Traders now assign a 99% probability of a rate cut on August 7, with the potential for a second before year-end. Sticky inflation complicates the BoE’s task, as services PMI slows and manufacturing remains in contraction. The second-highest June government borrowing on record and declining payrolls signal weakening momentum in the UK economy, despite still-high wage growth.

Confidence in UK fiscal management is faltering. While Bank of America noted a recent shift in sentiment against the Pound, it also emphasized that pessimism may be overdone, suggesting potential for a GBP rebound later in the summer—though likely not before further downside first.

Technical Setup Warns of Accelerated Breakdown in GBP/USD

From a structural standpoint, GBP/USD has formed a textbook reversal pattern. The daily chart printed a shooting star candle on Friday, now followed by three consecutive declines. RSI has turned lower, confirming weakening momentum. A confirmed break below the 1.3370 support zone opens the door for a deeper decline toward 1.3143/76, the convergence of the 38.2% yearly retracement and the extension of July’s down leg. Resistance now sits firmly at 1.3453, with bearish invalidation only above 1.3563/77 and ultimately 1.3627, the 61.8% retracement of the broader monthly drop.

Lower highs and lower lows define the current trajectory. Unless there’s a shockingly dovish Fed or a surprise from the BoE, bulls have no technical support to lean on.

Heat Map Shows Sterling as Weakest Major Currency in July

Data confirms the technical picture. In July, GBP fell 2.54% vs. the USD, the worst performance among majors. It also lost 1.00% to EUR, 1.29% to CHF, and 1.51% to AUD. The only gain was vs. the Japanese Yen (+0.52%), further underscoring that Sterling weakness is broad-based and not isolated to the dollar.

Compared to other major pairs, this performance suggests that confidence in Sterling is deteriorating both fundamentally and technically.

Fundamental Divergence Between US and UK Reinforces GBP/USD Bear Trend

U.S. economic indicators continue to print stronger than expected, while UK figures point toward stagflation risks—weak growth with persistent inflation. Recent UK consumer confidence dipped again, while the retail recovery remains modest at best. Meanwhile, the U.S. is experiencing a synchronized return of labor market strength, solid services demand, and forward-looking optimism driven by trade policy normalization.

Even if the Fed does pause, the rate differential will likely remain dollar-positive unless the BoE completely surprises markets by staying on hold—which seems increasingly unlikely.

Verdict: GBP/USD Remains Bearish, SELL Rallies Below 1.3450

The weight of macroeconomic divergence, technical breakdowns, and institutional momentum all point to continued weakness in GBP/USD. The pair’s inability to hold above 1.3450 and the failure to retake 1.3517 confirm that the path of least resistance remains to the downside. Unless the BoE shocks with a hawkish hold or Powell delivers unexpected dovishness, every rally in the pair remains an opportunity to sell.

Rating: SELL GBP/USD — Targeting 1.3140 with risk set at 1.3560
The trend is against Sterling, the fundamentals are against Sterling, and the flows continue to favor the U.S. dollar into a critical central bank showdown week. Only a major policy misstep can change the tide.

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