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GBP Extends Rally as Fed Dovishness Weakens Dollar, Markets Eye 1.3600 Breakout
Traders' Opinions
Summary:
The Pound Sterling extended its rally against the US Dollar on Thursday, climbing to near 1.3520, as dovish remarks from New York Fed President John Williams weighed on the Greenback.
Buy
TradingGBPUSD
EXP
1.35099
Entry Price
1.38000
TP
1.33100
SL
1.34899 -0.00216 -0.16%
0
Point
Flat
1.33100
SL
CLOSING
1.35099
Entry Price
1.38000
TP
The British Pound continued its advance against the US Dollar on Thursday, marking its third consecutive day of gains, as a softer Federal Reserve outlook undermined the Greenback and bolstered appetite for risk-sensitive currencies. The GBP/USD pair climbed toward 1.3520 in European trade, buoyed by remarks from New York Federal Reserve Bank President John Williams that reinforced expectations of imminent monetary easing in the United States.
At the time of writing, the US Dollar Index (DXY), which measures the dollar’s performance against a basket of six major peers, slipped to around 97.90, underscoring the growing bearish bias surrounding the world’s reserve currency.
Williams, speaking in an interview with CNBC, acknowledged that the U.S. economy is undergoing a period of adjustment, with slowing growth making the case for potential interest rate cuts. “Risks are more in balance. We are going to just have to see how the data play out,” he said, refraining from committing to a definitive policy shift at the Fed’s upcoming September meeting. His cautious, yet dovish, tone suggested that while officials are reluctant to pre-commit, the door remains firmly open for cuts should incoming data confirm economic weakness.
The remarks came against a backdrop of heightened political and institutional turbulence at the Fed, with Williams declining to address the recent dismissal of Governor Lisa Cook by President Donald Trump. Cook, who was accused by the administration of mortgage-related misconduct, has vowed to challenge the decision in court, adding a layer of uncertainty to the Fed’s already fragile independence at a time when monetary policy is under intense scrutiny.
The dollar’s slide reflects not only the dovish tilt in Fed communications but also mounting concerns that U.S. economic resilience may finally be fading. Investors are increasingly pricing in rate cuts over the coming months, with money markets suggesting a growing likelihood of policy easing before year-end. That expectation has undermined the Greenback’s yield advantage and redirected flows toward currencies perceived as undervalued or supported by relative stability, such as Sterling.
However, while the Fed’s hesitation is weighing on the dollar, the pound’s strength is not without its caveats. The UK economy continues to face structural challenges, from subdued growth prospects to persistent inflationary pressures, which may limit Sterling’s ability to sustain a one-sided rally. For now, though, the divergence in policy trajectories is giving the British currency the upper hand.
Technical Analysis 
From a technical perspective, GBP/USD has staged a decisive rebound after defending the 1.3440 support level, which served as a springboard for the latest bullish correction. The pair has successfully broken above short-term resistance lines and escaped the gravitational pull of the 50-day Exponential Moving Average (EMA50), confirming a shift in near-term sentiment.
Momentum indicators, however, suggest the rally may be approaching a point of exhaustion. The Relative Strength Index (RSI) has surged into overbought territory, flashing potential warning signs of a pullback.
The price action aligns closely with the 50% Fibonacci retracement level of the recent downtrend, a zone that often acts as a magnet for bullish flows before a decisive breakout. We are now eyeing two critical upside targets: 1.3600, a psychological threshold that could cap the near-term advance, and 1.3800, which would mark a more significant confirmation of sustained bullish momentum.
TRADE RECOMMENDATION
BUY GBPUSD
ENTRY PRICE: 1.3510
STOP LOSS: 1.3310
TAKE PROFIT: 1.3800
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