GBP/USD is facing a critical technical barrier at 1.3655, according to United Overseas Bank (UOB) Group FX analysts. In a technical note published Tuesday, the bank said further upside for the British pound against the US dollar is likely to encounter strong resistance at that level, despite recent gains.
UOB's analysts noted that momentum has been supportive, but the pair may struggle to break above 1.3655 in the near term. A clear move above this threshold would signal a more sustained bullish phase, potentially opening the door toward the 1.3700 area. Until then, the pair is likely to consolidate or pull back. The note highlighted that GBP/USD has been trading in a relatively tight range over recent sessions, with the pair recently hovering around the 1.3600 mark and gaining approximately 0.5% over the past week. The pound has found support from expectations of further interest rate hikes by the Bank of England, while the dollar has been underpinned by robust US economic data and hawkish comments from Federal Reserve officials.
Separately, the pound firmed on Tuesday as the US dollar retreated after the US Treasury announced a bond buyback program aimed at improving liquidity in the Treasury market. UK economic data released earlier this week showed resilient consumer spending and a modest uptick in manufacturing output, adding support for sterling. The US dollar index fell 0.3% in early European trading, reducing demand for the greenback as a safe haven and allowing risk-sensitive currencies such as the pound to gain ground. The Treasury's quarterly refunding announcement included plans to repurchase up to $30 billion in outstanding securities over the next quarter.
Analysts noted that the buyback program, while not a shift in monetary policy, signals the Treasury's commitment to supporting market functioning. Market expectations for a Federal Reserve rate cut in September have risen to 68%, up from 58% a week ago, according to CME FedWatch. In contrast, the Bank of England is seen as less likely to cut rates aggressively, with UK inflation remaining above target. This monetary policy divergence has widened the interest rate differential in favor of the pound.
Traders are now focused on the upcoming US non-farm payrolls report due Friday, which could influence the Federal Reserve's policy path. A weaker jobs report could strengthen rate-cut expectations and accelerate dollar declines, while a strong print may reverse the pound's recent gains.
