The GBP to USD exchange rate currently reflects a bullish bias. Key drivers include a widening interest rate differential, as the Bank of England has opted for a slower pace of rate cuts while the Federal Reserve is expected to implement more cuts. This divergence supports the pound. Additionally, improving retail sales figures in the UK could bolster the pound’s value, reinforcing positive sentiment.
In the near term, the GBP/USD is expected to trade within a stable range, reflecting recent price behavior slightly above its three-month average. Markets have witnessed fluctuations within a limited scope, maintaining a 3.7% range.
An upside risk could arise from stronger-than-expected economic growth in the UK, which would support further pound strength. Conversely, any rapid increase in U.S. interest rates could exert downward pressure on the GBP, impacting the exchange rate negatively.