GBP/USD Eyes 3-Year Peaks: Bull Case for Sterling Amid Fed Uncertainty and UK Labor Shifts

The GBP/USD exchange rate has surged to a 3-year high of 1.3732, nearing the psychologically critical 1.3750 resistance level, driven by a confluence of technical and fundamental factors. This article dissects the bullish momentum and outlines a strategic case for accumulating the pair, while tempering enthusiasm with key risks.

Fundamental Drivers: Fed Vulnerability and UK Labor Market Dynamics

1. US Dollar Weakness: Political Interference at the Fed

The US Federal Reserve faces unprecedented scrutiny over alleged White House pressure to delay rate hikes, undermining its independence. This has eroded the USD's safe-haven appeal. reveals a 21% rally during periods of heightened Fed credibility concerns, with the pair now testing multiyear highs. Investors are pricing in a lower Fed terminal rate and prolonged USD underperformance, favoring cross-currency pairs like GBP/USD.

2. BoE's Dovish Bias vs. Softening Labor Market

While the UK labor market has shown resilience—unemployment remains at 4.0%—vacancies have declined for six consecutive months, signaling cooling demand. This has fueled expectations of BoE rate cuts by mid-2025, yet the central bank has remained cautiously hawkish, citing persistent inflation risks. The BoE's reluctance to pivot fully dovish, despite soft data, has reduced GBP selling pressure, allowing the pair to rally despite CPI easing to 5.4% in May.

3. Technical Breakout: GBP/USD Above 1.3750

The pair has staged a bullish breakout above the 1.3750 resistance zone, previously a multiyear ceiling. A daily close above this level confirms a bullish ascending triangle pattern, with targets initially at 1.3800 and 1.4000 (the 2022 high). shows the RSI at 70, signaling overbought conditions—a typical pullback risk but not yet a reversal signal.

Investment Strategy: Accumulate Below 1.38, Target 1.40

Entry Point:

• Accumulate gradually between 1.36 and 1.37, using retracements as buying opportunities. A break of 1.3750 confirms a sustained move higher.

Profit Targets:

• First Target: 1.3800 (near-term resistance).
• Major Target: 1.4000 (2022 peak). Sustained closes above this level could extend gains to 1.4200.

Key Risks to Monitor:

1. Overbought RSI (70+): A spike above 75 could trigger a correction. Watch for divergence between price and momentum.
2. US Inflation Data (July 12): A hotter-than-expected print could revive Fed hawkishness, lifting the USD.
3. UK GDP Revisions: Downward GDP revisions in Q2 could reignite BoE easing bets, pressuring GBP.

Stop-Loss Levels:

• Place stops below 1.3550 initially. On a close below 1.3400, the bullish case weakens.

Conclusion: Sterling's Moment Amid USD Fragility

The GBP/USD's ascent reflects a rare alignment of technical momentum and fundamental tailwinds, with USD vulnerability and BoE resilience combining to lift the pair. While overbought conditions and macro risks demand caution, the 1.36-1.37 zone offers an attractive entry for a multi-month trade toward 1.40. Investors should layer positions, remain nimble on RSI readings, and monitor US inflation closely. For now, the path of least resistance remains higher—until the Fed's credibility or UK data shifts.