GBP/USD traded lower during Friday's Asian session, slipping back to around 1.3450, driven primarily by a short-term strengthening of the US dollar. This followed three consecutive days of gains for the pound, which faced profit-taking pressure as the market reassessed signals from the Federal Reserve.
The Federal Reserve's latest policy meeting concluded with a decision to hold interest rates steady for the fifth consecutive time, in line with widespread expectations. However, the voting result within the policy statement revealed clear internal division within the Federal Open Market Committee (FOMC), with a 9-to-3 vote reflecting differing views among officials on the future policy path. Some institutions believe that while the Fed kept rates stable this time, the internal disagreement has heightened market uncertainty about the future policy direction. On one hand, some officials are focused on inflation risks and prefer maintaining restrictive policies; on the other hand, some are more concerned about slowing economic growth. This hawkish pause stance provided short-term support for the dollar, especially as the market continues to anticipate possible further adjustments to US interest rate policy this year. However, if US economic data continues to weaken, the upside for the dollar could be limited.
Meanwhile, an improvement in global risk appetite could undermine the dollar's safe-haven appeal, offering opportunities for the pound to rebound. Recent concerns about further escalation of the Middle East situation have eased slightly. Progress in communication between the US and Iran regarding regional stability and shipping security has prompted some safe-haven capital to flow back into risk assets. Additionally, US President Donald Trump announced an agreement involving the Gaza situation, which boosted market risk sentiment. If global demand for safe-haven assets continues to decline, the risk premium previously gained by the dollar could shrink further.
Changes in Bank of England (BoE) policy are also influencing the pound's trajectory. The BoE recently held its interest rate steady, but the voting result showed a 6-to-3 split. Notably, one previously dovish committee member joined the camp favouring a rate hike, surprising the market. Some institutions believe that while the BoE's decision indicates internal debate about inflation risks, aside from the voting split, the majority of committee members still prefer to maintain policy stability, as current inflation data does not yet show significant second-round effects. The BoE's future policy path will depend on wage growth, services inflation, and economic growth performance. If inflation continues to decline, the central bank may maintain a wait-and-see stance; however, if price pressures re-emerge, expectations for another rate hike could increase, providing support for the pound.
Currently, the GBP/USD pair is influenced by both expectations for US dollar policy and the UK interest rate outlook. In the short term, the Fed's hawkish pause limits the pound's upside, but improving global risk sentiment and declining demand for the dollar as a safe haven provide some buffer for the exchange rate. Future focus will be on US economic data, speeches from Fed officials, UK inflation data, and developments in global risk events to determine the next directional move for GBP/USD.
Looking at the daily chart, GBP/USD experienced a pullback after a series of gains, currently trading around 1.3450. Short-term momentum has weakened, but the overall structure remains range-bound with a bullish bias. The pair broke through a key area previously and continues to trade near its major moving averages, with the uptrend not yet fully broken. Resistance is seen in the 1.3500 to 1.3550 area; a break above this zone could lead to a test of the 1.3600 level. Initial support lies around 1.3400, followed by the 1.3350 and 1.3300 areas. Technical indicators show that recent upward momentum has cooled, but no clear trend reversal signal has formed yet.
On the 4-hour chart, GBP/USD has entered a short-term consolidation and correction phase, with the price breaking below some short-term moving averages, indicating increased profit-taking by bulls. If the pair can hold support at 1.3400 and break back above the 1.3480 area, it could resume its upward move towards 1.3550. Conversely, a break below 1.3400 could extend the correction towards 1.3350. The current 4-hour trend remains influenced by the strength of the US dollar, with short-term direction depending on changes in Federal Reserve policy expectations and market risk appetite.
GBP/USD is currently in a state of balance between support from US dollar policy and improving risk sentiment. The Fed's hawkish pause and internal policy divisions provide short-term momentum for the dollar, but declining global risk aversion could erode the dollar's advantage. In the UK, the BoE held rates steady but showed an internal voting split, indicating policymakers remain focused on inflation risks. The future direction of the pound will likely depend on whether UK economic data supports further tightening expectations. Overall, GBP/USD may continue to trade in a range in the near term. If global risk appetite improves further, the pound could have opportunities to rebound; however, if the dollar strengthens again due to Fed policy expectations, the pair could face renewed downside pressure. Investors should focus on the divergence in monetary policy between the US and Europe, as well as key technical support levels.
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