Sterling rose 0.11% against the US dollar, with GBP/USD near 1.3270, even as UK figures pointed to softer momentum. GDP expanded 0.6% quarter on quarter in Q1 2026, while annual growth slowed to 0.9% from 1.1%. In the US, May JOLTS job openings increased to 7.594m, above the 7.3m forecast and the downwardly revised 7.585m in April; separately, US consumer confidence improved in June as lower petrol prices followed a truce between the US and Iran. Markets were also factoring in 35 basis points of Federal Reserve tightening by end-2026, while expectations for July were for unchanged rates.
On the technicals, the daily chart placed GBP/USD around 1.3253, retaining a bearish near-term bias beneath the 50-, 100- and 200-day SMAs clustered near 1.3420. The pair was also below a broken uptrend line at 1.3468 and a former downtrend resistance line around 1.3526, with the RSI at 42. Resistance was flagged at 1.3420, then 1.3468 and 1.3526; the analysis cited limited mapped support levels below 1.3253.
Growth Divergence and Central Bank Policy Outlook
We see the UK economy is slowing, with Q1 yearly growth missing forecasts and recent data from the British Retail Consortium showing June retail sales fell 1.5%. In contrast, the US is dealing with a resilient labor market and hawkish signals from the Federal Reserve. This divergence between a slowing UK and a more robust US is the main theme for the coming weeks.
Bank of England Governor Bailey’s concern about inflation reaching 3.2% is complicated by the weakening growth data. Meanwhile, Fed officials sound more prepared to consider rate hikes, a stance that has historically favored a stronger dollar during periods of policy divergence since the 2022 tightening cycle. We believe this growing policy gap will put downward pressure on the GBP/USD pair.
Strategies for GBP/USD Weakness
Given this outlook, we are positioning for further GBP/USD weakness. We view the resistance around the 1.3420 moving average cluster as a strong ceiling. Buying put options with strike prices below 1.3200 for late July or August expiration seems like a prudent way to capitalize on potential downside.
Another strategy is to sell call spreads with a ceiling around that 1.3420 resistance level, which would profit if the pair remains stagnant or falls. While the CME FedWatch tool indicates a 90% chance of no Fed hike in July, the probability for a September hike has now risen to 40%, supporting a stronger dollar outlook. This reinforces our view that rallies in the pound will likely be sold off.
