Market Insights > Daily Market Analysis

26 June 2025,05:49

Daily Market Analysis

Pound Rallies on Ceasefire, Hawkish BOE Signals

26 June 2025, 05:49

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Key Takeaways:

*GBP rebounds near recent highs on ceasefire-led risk rally

*BOE tones remain hawkish despite market pricing for cuts

*Political risks persist, but dollar softness supports GBP

Market Summary:

The British Pound held firm and rebounded toward recent highs as easing geopolitical tensions and a hawkish tilt from the Bank of England (BOE) combined to support sentiment. Investors are currently focusing on two key catalysts impacting the UK currency: the tentative Middle East ceasefire and the BOE’s monetary stance.

Sterling found renewed demand following the U.S. President Donald Trump’s weekend announcement that Israel and Iran had agreed to a ceasefire. The move improved global risk appetite and drove capital away from safe-haven assets such as the U.S. dollar and Swiss franc, into higher-risk currencies like the pound. However, traders remain cautious due to the absence of formal confirmation from Tehran and sporadic reports of continued hostilities, particularly near Iran’s western border. While market relief is evident, geopolitical risks remain elevated and could quickly reverse sentiment should ceasefire negotiations unravel.

On the policy front, the BOE has maintained a cautious yet hawkish tone. While acknowledging signs of labor market cooling and subdued growth in sectors like manufacturing, policymakers remain concerned about upside inflation risks. Deputy Governor Dave Ramsden emphasized the importance of watching for persistent inflationary pressures, while external MPC member Megan Greene cited energy volatility and global trade frictions as factors that could delay rate cuts. Despite market pricing suggesting an 80% probability of an August cut, recent commentary has cast doubt on the immediacy of any easing cycle.

Domestically, the UK’s economic picture remains mixed. Sluggish momentum in job vacancies and industrial activity continues to weigh on confidence, while political uncertainty ahead of potential fiscal policy shifts under a Labour-led government adds to the list of risks facing the Pound. Nonetheless, the broader narrative of U.S. dollar weakness — driven by a dovish Fed outlook and long-term de-dollarization themes — has provided underlying support for GBP/USD.

Technical Analysis

GBPUSD, H4

GBP/USD continues to advance, with price action extending beyond the 61.8% Fibonacci retracement level near 1.3655, now testing resistance just shy of the 78.6% retracement at 1.3727. The strong bullish impulse from the 1.3420 support zone reflects improving sentiment, but the rally is nearing a key inflection point that may determine whether this uptrend can be sustained.

Momentum indicators are signaling stretched conditions. The Relative Strength Index (RSI) has surged to 73, entering overbought territory and suggesting potential exhaustion in near-term buying momentum. This level often precedes consolidation or short-term pullbacks, particularly when accompanied by resistance overhead. The MACD line continues to edge higher above the signal line, with the histogram expanding in positive territory — a sign of accelerating upside momentum and growing conviction among buyers.

Unless GBP/USD posts a decisive breakout above the 1.3727 ceiling, price risks stalling or retracing toward former resistance-turned-support levels near 1.3655 and 1.3600. A failure to hold above 1.3655 could open a broader corrective move targeting the 1.3600–1.3550 zone. Near-term price action around 1.3727 will be critical in confirming whether the pair is building for further gains—or setting up for a consolidation phase following its recent bullish run.

Resistance Levels: 1.3810, 1.3727

Support Levels: 1.3655, 1.3600

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