Sterling faces resistance ahead of the 2025 high it put in at 1.3648 on Tuesday, with bulls hesitant to push for new highs amid a mixed economic outlook.

Although a broad risk rally followed the recent Mideast ceasefire, the current geopolitical landscape and policy expectations remain fluid.

Recent congressional testimony by Federal Reserve Chairman Jerome Powell reinforced a cautious approach to monetary policy, suggesting the U.S. central bank remains in a wait-and-see mode regarding inflation and interest rates.

While a July U.S. rate cut isn't entirely off the table, futures markets indicate a slim chance of any immediate changes, with the more probable timeline for cuts beginning in September. Currently, futures anticipate a total of 60 basis points in Fed cuts by the December meeting.

On the UK front, short-term interest rate futures reflect a 60% probability of a Bank of England cut in August, with expectations for a total of 51 basis points by the end of the year.

The relatively symmetrical rate paths for the Fed and BoE suggest that economic data will be crucial for GBP/USD movements in the short term. If expectations build toward the Fed implementing an earlier-than-expected cut in July, data permitting, sterling bulls could target new 2025 highs, eyeing the 1.3760 level, which aligns with the 50% Fib of 1.7192-1.0327.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)