The British pound continues to find support from strong domestic fundamentals and a resilient labour market. Meanwhile, the US dollar faces growing pressure from deteriorating economic data and dovish central bank expectations. With supportive sentiment and a well-structured technical outlook, GBP/USD presents a high-quality long trade setup.

Fundamental Analysis

The UK economy is showing unexpected strength. Quarter-on-quarter GDP growth surged to 0.7%, the highest among the major developed economies. Retail sales continue to expand (+0.4% MoM), and inflation remains elevated at 3.6% YoY. This forces the Bank of England to maintain a cautious stance despite recent global easing trends. Adding a perspective on GBP/USD rates, unemployment is steady at 4.5%. Additionally, wage growth has been robust, helping to sustain consumption even under tighter monetary policy.

In contrast, the US economy is weakening. GDP contracted by -0.3% in the most recent quarter. Inflation has continued to ease to 2.3% YoY and 0.2% MoM, aligning with the Fed’s 2% target. Retail sales were strong at 1.5% MoM, but consumer confidence fell sharply from 57 to 52.2. Moreover, business confidence continues to slip. These developments have led markets to price in two interest rate cuts by the Federal Reserve before the end of the year.

The shifting rate differential is now leaning in favour of the pound. Particularly as the Bank of England is expected to delay cuts due to persistent inflationary pressures. This dynamic is central to understanding GBP/USD performance.

Sentiment Analysis

Speculative positioning is reflecting this macro divergence. CFTC data shows a consistent increase in GBP net long positions, indicating a structural shift in investor sentiment. At the same time, USD net longs are declining, as investors unwind bullish dollar bets in anticipation of rate cuts.

Market narratives are increasingly focused on UK resilience. Bloomberg and Reuters have both highlighted the UK’s surprisingly strong growth data. Sell-side analysts are gradually upgrading their GBP forecasts. In relative terms, Sterling has become the preferred high-yield G10 currency. Meanwhile, the US dollar is viewed as vulnerable to both growth and policy risks. This shift impacts GBP/USD sentiment directly.

Risk sentiment is moderately supportive, with global equity markets firm and credit conditions stable, which typically favours GBP over USD.

Technical Analysis

The GBP/USD daily chart shows a clearly bullish structure. Price is trading well above the Ichimoku Cloud, confirming trend continuation. The Tenkan-Sen (1.3271) is above the Kijun-Sen (1.3123), forming a bullish crossover, and both lines are upward-sloping. The Chikou Span is above both price and the Kumo, confirming trend strength.

The future Kumo is bullish, with Senkou Span A above Span B, indicating continued upside momentum. Price recently rebounded from the Tenkan-Sen support and is approaching the 1.33 resistance level. A breakout above 1.33 could open the door to a retest of the 1.3450 zone. This provides insights into GBP versus USD movements.

RSI sits at 54.42, above the midline, with signs of a renewed upturn. MACD remains in bullish territory, though the histogram is slightly negative, indicating a brief consolidation phase. Volume remains consistent, showing no distribution yet.

Conclusion

GBP/USD is supported by a robust UK macro backdrop, fading US growth, and dovish Fed expectations. Sentiment is turning in favour of the pound as institutional positioning shifts. The BoE is expected to stay on hold longer than the Fed. The technical picture supports a breakout above recent resistance, offering a strong case for additional upside.

For traders looking to trade in line with macro cycles and institutional momentum, this GBP/USD long setup offers an attractive opportunity. To enhance your trading strategy and stay ahead of market shifts, explore the Trading Courses from Traders MBA.