Sterling is expected to face continued near-term volatility as macro anxieties limit the upside of Monday's technical rebound. The currency managed a lofty bounce off its Asia session low of 1.3304, a floor established amid heightened U.S.-Iran conflict tensions. This corrective move higher has lifted GBP/USD back within the daily Bollinger envelope and the daily Ichimoku cloud, which currently spans 1.3487–1.3339.

However, this recovery may turn out to be a transitory relief rally due to sterling-specific and global macro conditions. On the UK front, lingering political uncertainties persist. Wednesday's UK inflation data is expected to indicate rising prices, likely keeping the Bank of England on a more hawkish path that will further tamp down economic growth. Politically, the specter of a potential tax-and-spend Labour replacement for PM Keir Starmer, alongside former Health Secretary Wes Streeting’s talk of rejoining the EU, threatens to inject additional uncertainty into UK governance. This backdrop could prompt the international investing community to avoid UK assets, further exacerbating the country’s fiscal position.

For now, sterling bulls are pushing higher, regaining 1.3400 in early North American trading. Looking at the technical daily levels for May 18, immediate resistance is capped by Friday’s 1.3408 high, with tougher upside barriers looming at the 200-DMA at 1.3426 and the Ichimoku cloud top at 1.3487. On the downside, solid support aligns at the daily cloud base by 1.3339, and anchored near today's low at 1.3304 and natural big-figure support by 1.3300.
Sterling Chart:


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