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1 July 2025,07:06

Daily Market Analysis

Pound Sterling Strengthens to Multi-Year High While GDP Reading in Focus Today

1 July 2025, 07:06

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Key Takeaways:

*The Pound Sterling bullish rally shows signs of easing in strength.

*Eyes on today’s UK GDP reading to gauge the Pound Sterling strength.

Market Summary:

The British pound has surged to its highest level since January 2022, bolstered by a combination of dollar weakness and growing expectations that the Bank of England will maintain its restrictive monetary policy stance longer than peers. This bullish momentum comes despite lingering concerns about the UK’s economic health, creating an interesting dynamic for currency traders. The pound’s strength primarily stems from the inflation factor. The UK’s latest inflation reading of 3.4%—while showing progress—remains stubbornly above the central bank’s 2% target, forcing policymakers to maintain their hawkish rhetoric. This was evident in the BoE’s recent policy decision, where officials emphasized the need for persistent vigilance against price pressures. However, the currency’s rally faces potential headwinds from growing stagflation concerns. While inflation remains elevated, signs of economic softness have emerged, creating a precarious balancing act for policymakers. Today’s GDP release takes on heightened significance in this context—a stronger-than-expected reading could reinforce the pound’s bullish momentum by validating the BoE’s hawkish stance, while disappointing figures might revive fears of stagflation and trigger profit-taking after the currency’s impressive run.

Market participants face a delicate calculus—while the BoE’s comparatively hawkish stance continues to support sterling, the currency’s valuation appears increasingly stretched against fundamentals. Today’s GDP data will be crucial in determining whether the pound can sustain its momentum or whether concerns about economic weakness will finally check its ascent. Traders should watch for potential volatility around the release, as the market recalibrates its expectations for both UK growth prospects and monetary policy.

Technical Analysis

GBPJPY, H4

The GBP/JPY cross has been riding a powerful uptrend since bouncing off its April lows near 184.40, consistently carving out higher lows in a textbook bullish pattern. However, the pair’s recent price action suggests this relentless advance may be running out of steam, with the currency now caught in a sideways drift near its cycle highs. This consolidation represents a critical inflection point that could determine whether the uptrend resumes or gives way to a meaningful correction.

At the heart of this technical standoff lies the 197.40 level – a key Fair Value Gap that has become the battleground for bulls and bears. A clean break below this support zone would signal the first genuine crack in the pair’s bullish armor, potentially opening the door to a deeper pullback toward 195.00 initially, with 193.50 looming as secondary support. Conversely, if buyers can defend this foothold and propel prices higher, it would reaffirm the underlying uptrend and set the stage for a potential assault on the psychologically significant 200.00 handle.

The momentum indicators paint a concerning picture for bulls. The RSI’s retreat from overbought territory suggests the buying frenzy has cooled, while the MACD’s bearish crossover hints at waning upward momentum. These technical warnings gain credence when viewed alongside the pair’s extended rally without meaningful consolidation – a condition that often precedes either a healthy pullback or prolonged sideways action to work off overbought conditions.

Resistance levels: 198.70, 200.60
Support levels: 196.20, 194.10

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