GBP/USD Today: Pound Holds Near Six-Month High as 1.3660 Breakout Looms

Key Takeaways

• GBP/USD traded near 1.3630 on August 25, remaining close to its six-month high around 1.3675.
• US fiscal concerns and the Treasury’s expanded bond-buyback programme have weighed on the dollar.
• A sustained break above 1.3660 could expose levels between 1.3700 and 1.3750, while 1.3600 is the first support level.

GBP/USD Holds Steady Near 1.36

GBP/USD was little changed near 1.3630 on August 25, keeping the pound close to its strongest level against the US dollar in six months. The pair reached approximately 1.3675 last week before losing momentum and has since consolidated above 1.3600 as traders evaluate the strength of the recent advance.

The pound has appreciated around 2.6% against the dollar over the past month, driven by a weaker US currency and relatively strong UK economic data. However, GBP/USD has not yet established a firm position above the 1.3650–1.3675 resistance zone.

US Treasury Turmoil Weighs on the Dollar

The recent rise in sterling is largely attributed to developments in the US Treasury market rather than significant improvements in the UK’s economic outlook. The 30-year Treasury yield briefly reached approximately 5.34%, its highest level since 2007. Typically, rising yields would bolster the dollar, but the rapid increase has raised concerns about US borrowing costs and federal debt sustainability.

In response, the US Treasury announced plans to double the maximum size of its liquidity-support buybacks for longer-dated securities, increasing operations from $2 billion to at least $4 billion each, starting in September. This announcement initially lowered long-term yields and weakened the dollar, allowing GBP/USD to reach a six-month high. However, subsequent clarifications from Treasury Secretary Scott Bessent indicated that no purchases had yet been made, limiting the initial market reaction.

While the buyback programme may temporarily support bond liquidity, it does not alleviate ongoing concerns regarding US deficits and future debt issuance, which continue to create volatility in Treasury yields and the US Dollar Index.

Bank of England Expectations Support Sterling

UK economic data has also bolstered the pound, although the overall outlook is mixed. The UK GDP grew by 0.4% in the second quarter, with a monthly output increase of 0.3% in June, primarily driven by the services sector, which offset declines in production and construction. These figures suggest that while the economy is slowing, it has avoided stagnation.

Recent business surveys have shown positive trends, with the flash UK Services PMI rising to 52.8 in August from 52.1 in July, indicating expanding activity. The Bank of England maintained its Bank Rate at 3.75% in July, but a split vote among Monetary Policy Committee members suggests ongoing concerns about inflation, which may lead to a slower shift towards a more accommodative stance.

Despite the divergence in policy, the Federal Reserve also held its target range steady, indicating that the near-term direction of GBP/USD may depend more on changing rate expectations and fiscal confidence than on the current differences in policy rates.

Can GBP/USD Break Above 1.3660?

The immediate technical focus is on the 1.3650–1.3675 resistance area. A daily close above 1.3660, followed by continued buying above last week’s peak, would strengthen the case for an extension towards 1.3700. Beyond that, the 1.3750 region may become the next target. However, repeated failures around 1.3660 could indicate that the pair remains in a consolidation phase rather than confirming a bullish breakout.

On the downside, 1.3600 serves as the first support level, having contained several recent pullbacks. A break below this level could bring 1.3550 into focus, followed by the significant psychological level at 1.3500.

Market sentiment may also play a role in the breakout attempt, with expanded US sanctions against Iran increasing geopolitical uncertainty. Additionally, Nvidia’s upcoming earnings could influence risk appetite across global equity and currency markets, potentially generating safe-haven demand for the dollar.