The Pound Sterling (GBP) has seen a correction after reaching around 1.3000 against the US Dollar (USD) mid-week, though it remains at its highest level in four months. Ongoing geopolitical events, such as US airstrikes on Yemen and retaliatory attacks by Houthis, have contributed to market fluctuations.
GBP/USD trades below 1.2950 following a negative close on Thursday, reflecting mounting bearish pressure. The Bank of England maintained its policy rate at 4.5%, with only one policymaker supporting a rate cut, indicating a cautious approach to monetary policy that failed to bolster the Pound effectively.
Market Reaction To Recent Events
This pullback in GBP/USD after touching 1.3000 highlights the fragility of recent gains. A four-month high suggests that Sterling was enjoying a period of strength, but its retreat under 1.2950 signals hesitation among buyers. External risks, particularly tensions in the Middle East, have introduced uncertainty. The airstrikes by the US and the response from the Houthis have stirred volatility, making markets more reactive to geopolitical events.
The Bank of England’s decision to hold interest rates steady at 4.5% was widely expected, yet it didn’t provide much support for the currency. With only one policymaker advocating for a rate reduction, the overall guidance remains steady for now. Nonetheless, this does not suggest unwavering confidence. If more policymakers begin leaning towards cuts in the coming months, markets may start pricing in a softer policy stance, exerting further pressure on the Pound.
We recognise that traders must weigh these factors carefully. The Pound’s rejection at 1.3000 combined with external uncertainties points towards a market that is not entirely convinced of further gains. While Sterling still trades at elevated levels, the hesitation from policymakers and geopolitical risks could make it harder for the currency to hold its ground.
Short Term Outlook For Gbpusd
For short-term positioning, watching how GBP/USD behaves near 1.2900 will be important. If buyers struggle to defend this area, it could confirm that bearish momentum is strengthening. However, should it stabilise and retest 1.3000, it may signal resilience instead. The next few sessions will be pivotal.
