The GBPUSD remains in a robust uptrend as of mid-2025, driven by strong domestic economic data amid modest USD weakness. UK Retail Sales surged by 1.2% m/m in April (vs. 0.2% est.), with a 5% y/y increase (vs. 4.5% est., prior 2.6%), indicating resilient consumer demand. The flash UK Services PMI rose to 50.9 in May (vs. 50.2 prelim), while the manufacturing sector contracted less than expected. UK house prices also climbed 3.5% y/y, spurred by buyers attempting to beat incoming tax changes.

On the policy front, expectations for additional BoE rate cuts have diminished, following four 25bps reductions since August 2024, bringing the Bank Rate from 5.25% to 4.25%. However, the slight uptick in the unemployment rate to 4.6% (from 4.5%) and declining average earnings could support the BoE’s dovish lean if growth softens. Geopolitical confidence has been bolstered by a £15 billion defence-spending plan under the AUKUS pact, but risks remain if the US proceeds with Section 899 in its budget—potentially targeting UK firms for tax policy disagreements such as OECD’s Pillar Two.

Technical Analysis: GBPUSD has been in a consistent upward channel since January 2025, carving out higher highs and higher lows. The pair hit a new three-year high at 1.3616, before pulling back below 1.3500, driven by softer US labour data. The structure, however, closely resembles the 2024 peak pattern, raising caution. Key support levels to watch are 1.3430 and 1.3300—a break below these levels on a weekly close could confirm a near term top in place and expose downside targets at 1.3200 and 1.3050 (notable imbalance zone). Conversely, a sustained breakout above 1.3616 could resume the bullish trend toward 1.3750+, but bullish conviction is weakening. Additionally, a breakout in the US Dollar Index (DXY) above 100.20 and its February trend line could shift momentum back in favour of the USD. Upcoming releases including April GDP, industrial production, and trade balance data will be critical in determining whether GBPUSD maintains upward traction or enters consolidation.