- The GBP/USD pair logged a seven-session win streak to trade near $1.3380, rebounding from recent year-to-date lows near $1.3200
- The surge was fueled by a cooling U.S. labor market, a hawkish Bank of England, and increased UK political stability
- While July seasonality historically favors the pound with a 0.4% gain, strong resistance sits tightly between $1.3375 and $1.3400
The sterling pound has seen a notable recovery in recent weeks, following a sharp decline in late June. The GBP/USD pair has experienced a seven-session winning streak, moving from a seven-month low near $1.3200 to the $1.3350-$1.3380 range. It’s a sharp turnaround from where things stood just two weeks ago, and it raises the question as to whether this the start of something bigger, or if the dollar’s wobble will fade.
Why the Pound Is Winning Against the Dollar
This rally has far more to do with the dollar’s weakness than any fresh strength in the pound. The dollar’s decline followed a US jobs report showing nonfarm payrolls increased by only 57,000 in June, falling short of expectations, with a downward revision to the May figure. This data has tempered the Federal Reserve’s previously hawkish outlook, which had indicated a potential rate hike rather than a cut later this year.
On the UK side, the political backdrop has also stopped deteriorating, at least for now. Prime Minister Keir Starmer’s resignation in June had shaken the sterling, but Andy Burnham, the leading candidate to replace him, has promised fiscal responsibility. This has calmed some investors’ worries before he’s expected to take office later this month.
Meanwhile, the Bank of England (BoE) has kept its policy pretty consistent, holding rates at 3.75% after a majority vote in June. Even though Governor Bailey has admitted there are risks of an economic slowdown, ongoing inflation worries mean that any interest rate cuts are unlikely soon. This helps the pound stay attractive compared to a dollar that looks like it’s weakening.
Is a Pound Bull Run Coming This Summer?
Whether this rally can transform into a full-scale summer bull run depends on historical patterns and upcoming policy meetings. From a pure seasonality standpoint, the calendar is firmly on the side of the British currency. Historically, July has traditionally been a highly bullish month for the GBPUSD pair, boasting an average positive return of roughly 0.4% going back to the 1970s.
However, forecasts are all over the place. Goldman Sachs and UBS forecast the pair could reach 1.38–1.40 later this year, believing the dollar will eventually weaken as the Fed returns to normal policy. JPMorgan disagrees, expecting the pair to stay between 1.28 and 1.34 because of lingering UK political uncertainty and a strong US economy that will keep the dollar supported.
A softer-than-expected June Nonfarm Payrolls report pointed to cooling labor conditions, forcing investors to adjust their long-term Fed interest rate expectations.
Yes, potentially, aided by seasonal trends and policy divergence, though sustained gains depend on incoming data.
BoE’s steady stance contrasts with Fed easing signals, narrowing differentials and favoring modest pound strength.