The Pound Sterling (GBP/USD) has achieved eight consecutive higher daily closes, rising from near 1.3150 to approach the 1.3400 level, now trading just below its 200-day Exponential Moving Average (EMA) with the 50-day EMA just beneath it [1]. On Monday, the pair based near 1.3350 during the London morning and climbed throughout the afternoon, stalling just shy of 1.3400 [1]. This rally persisted despite a hawkish Federal Reserve governor's comments and robust US services data, indicating that the move was less about positive UK developments and more about a weakening US Dollar, as the market unwinds the late-June surge driven by the new Fed Chair's hawkish debut [1].
The US Dollar's retreat accelerated after the June Nonfarm Payrolls (NFP) report showed a print of 57K, well below expectations of over 100K, leading rate markets to assign roughly a 75% probability to a July hold by the Fed [1]. The subsequent soft composite activity survey further diminished the likelihood of a rate hike, contributing to the Dollar's decline and Sterling's ascent [1].
On the UK political front, the Pound's recovery began after the Prime Minister announced his resignation on June 22, with GBP/USD bottoming near 1.3150 two days later at the height of uncertainty [1]. Since then, the succession process has become more orderly, with would-be challengers stepping aside and the cabinet supporting Andy Burnham. Nominations open Thursday and close on July 16, potentially installing a new Prime Minister as soon as July 17 in an uncontested race [1]. Markets, which had punished the leadership vacuum, are now pricing in the resolution, even though the economic platform of the presumptive winner remains largely undefined [1].
The Bank of England (BoE) has also provided a quiet tailwind for Sterling. The BoE held rates at 3.75% on June 18 with a 7-2 vote, with both dissenters favoring a hike to 4.00%—doubling the hawkish camp since April [1]. Inflation currently stands at 2.8%, but the BoE projects it will rise above 3% by autumn due to lingering energy costs, and market expectations for the next rate hike cluster around late 2026 [1]. Sterling remains one of the few major currencies with an upwardly priced policy path, though falling crude oil prices are eroding the case for a hike [1].
Looking ahead, key events include the Financial Stability Report on Tuesday at 09:30 GMT and another speech by a hawkish BoE Monetary Policy Committee member at 14:15 GMT. Wednesday will see the release of the June FOMC meeting minutes at 18:00 GMT, which could influence market sentiment depending on their tone [1].
CONCLUSION
Sterling's recent rally has been driven by a combination of US Dollar weakness and increased political clarity in the UK, with markets responding positively to the resolution of leadership uncertainty. While the Bank of England's policy stance and inflation outlook provide a supportive backdrop, upcoming central bank communications and economic reports remain potential catalysts for further market moves.