GBP/USD - Cable at three-year highs - 05/22/2025 (GMT)

$1.34684, 21 May’s intraday high, was the highest price for cable since the first quarter of 2022 and the culmination of a range of different factors from trade and political stability to monetary policy and economic data. The narrative of fear over the USA’s deficit has resurfaced within the last few days as American government bonds were downgraded, but stock markets haven’t seen a significant impact from this. The most likely scenario for the Fed now is next cut in September, and that seems to be possible for the BoE also after significantly higher British inflation.

The relatively limited reaction to British inflation on 21 May and quick retracement lower after the new high seem to suggest lower demand and possible profit-taking, so an immediate continuation upward is questionable. The slow stochastic signals overbought while volume remains low compared to the peak early last month. The next obvious target would be $1.35 while $1.32, the area of the 50 SMA from Bands, might be a support.

There’s not much major data coming up in the next few days for either currency, but the Fed’s minutes on 28 May might inform sentiment. 29 May’s American GDP could also drive movement if the result is significantly different from the advance figure.

This is my personal opinion, not the opinion of Exness. This is not a recommendation to trade.