The British pound's bullish momentum against the U.S. dollar appears poised to continue, driven by a subtle alignment in monetary policy expectations from the Federal Reserve and the Bank of England, coupled with substantial dollar and euro selling by Japanese authorities, which has bolstered the yen.

While attention has recently been drawn to ongoing yen intervention by the MoF and U.S. Treasury, moving focus away from oil and geopolitical concerns, the recent aggressive selling in USD/JPY has had a ripple effect strengthening other major currency pairs.

Although the pound has dipped slightly today, its underlying strength remains intact due to the less hawkish stance of the Fed and the more hawkish tone from the BoE after recent bank meetings. This has created a favorable environment for GBP, particularly as positioning trends suggest an unwinding of the current GBP net spec short position, valued at $5.4 billion.

From a technical perspective, GBP/USD encounters resistance at today's high of 1.3505, followed by the July 15 high at 1.3556. A sustained close above this level could bring the early May highs in the mid-1.363 range into view. Conversely, bearish sentiment would require a decline below the 200-day moving average at 1.3400, with a further drop below 1.3274, the July 28 low, potentially exposing the yearly low at 1.3140.

In summary, the combination of shifting rate expectations and positioning dynamics suggests that GBP/USD could maintain its upward trajectory in the near term, even after the current round of intervention-related USD selling ends.
GBP Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)