When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
Eurozone CFTC EUR NC Net Positions down to €0.5K from previous €9.3K
When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
United States CFTC S&P 500 NC Net Positions rose from previous $-80.9K to $-42.5K
When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
Japan CFTC JPY NC Net Positions: ¥-72.9K vs previous ¥-62.8K
When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
Australia CFTC AUD NC Net Positions: $81.5K vs $70.9K
When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
US Dollar Weekly Forecast: Supported by policy, tested by geopolitics
The week that was
Looking at the weekly chart, the US Dollar (USD) has traded in a choppier, more volatile fashion, struggling to build on the strong gains seen the previous week.
As has been the case lately, markets have remained cautious, with uncertainty around the Middle East conflict still front and centre, compounded by the lack of a clear and consistent signal from the White House.
Against that backdrop, the US Dollar Index (DXY) has edged slightly lower, although it continues to hold comfortably above the key 100.00 psychological level.
The modest pullback in the Greenback has broadly tracked a softer tone in US Treasury yields across the curve, reflecting the back-and-forth nature of headlines surrounding the geopolitical situation.
Fed speakers: comfortable on hold, but inflation risks creeping back
This week’s Fed rhetoric leans toward patience, but with a subtle shift in tone. Policymakers are broadly comfortable with where rates are, yet they are increasingly aware that the inflation story, particularly through energy, is not fully behind them.
Powell and Williams anchored the centre. Both signaled that policy is in good shape and that there is no urgency to move. Inflation is still expected to return to target; the labour market is cooling but stable, and the Fed can afford to wait and watch how the data evolve.
But around that steady core, the message becomes more nuanced.
On one side, Miran struck a clearly dovish note, pushing back against inflation fears and pointing instead to signs of softening in the labour market. His message was simple: the Fed may already be doing enough, and there could be room to ease if conditions weaken further.
On the other side, Schmid and Logan kept the inflation debate alive. Both warned that price pressures may prove stickier than expected, especially if higher energy costs begin to feed through more broadly. Schmid, in particular, pushed back against the idea that inflation will smoothly glide back to 2%.
In between, Musalem and Goolsbee highlighted the growing complexity of the outlook. Policy is well-positioned, but risks are now clearly two-sided. Energy shocks, tariffs and geopolitical tensions are adding uncertainty, making it harder to find a clean policy path.
The common thread is clear.
The Fed is not rushing to act, but it won’t declare victory over inflation.
Inflation remains elevated
The US started the year with a slightly softer inflation backdrop. Headline Consumer Price Index (CPI) rose 2.4% YoY in February, matching January’s pace, while the core measure held steady at 2.5% YoY.
At first glance, that suggests inflation is moving in the right direction, even if it is still running above the Fed’s 2% target.
For markets, that has been enough to keep the disinflation narrative alive, gradually reviving expectations that rate cuts could come into view later on. But from the Fed’s perspective, this looks more like progress than victory, especially with the full impact of tariffs on prices still uncertain.
The Fed’s preferred gauge, the Personal Consumption Expenditures (PCE) index, tells a similar story, but with a slightly more cautious tone. January data showed inflation easing to 2.8% YoY from 2.9%, still comfortably above target.
Looking ahead, the inflation path could become more complicated. Rising Oil prices, driven by Iran’s closure of the Strait of Hormuz, risk feeding quickly into fuel and transport costs. If those pressures persist, the disinflation trend could start to look less straightforward in the months ahead.
And the labour market gives no signs of further cooling
Indeed, the latest data from the Bureau of Labor Statistics (BLS) showed the economy added 178K jobs in March, crushing initial estimates and making for quite the reversal from February’s revised 133K drop. Adding to these figures, the Unemployment Rate ticked lower to 4.3%, while the Average Hourly Earnings, a proxy for wage inflation, rose 3.5% over the last 12 months, although easing from the previous month’s 3.8% reading.
USD positioning: tentative rebuild of longs
The US Dollar is quietly regaining favour. After holding a small net short position earlier in the month, speculative accounts have flipped back into modest net longs, which have held broadly stable into the latest week.
At the same time, open interest has picked up, pointing to fresh positioning rather than just short covering. That shift fits perfectly with the broader resilience in the Greenback, supported by firm US yields and persistent geopolitical uncertainty.
The implication is that the Dollar may be in the early stages of a broader positioning rebuild. Although positioning is not yet stretched, the current trend reinforces the recent bullish price action and indicates that dips could begin to attract buyers more consistently, particularly if yields remain supported and risk sentiment remains fragile.
What’s next for the US Dollar
Next week, the US docket will be mostly focused on inflation, with the releases of prices tracked by the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE). In addition, investors are expected to closely follow the publication of the FOMC Minutes after the hawkish hold at the March 18 meeting.
Bottom line
It is worth keeping in mind that the US Dollar’s rally, which began in late January, was initially driven by a run of stronger US data and a more consistent, steady message from the Fed.
That move gathered further momentum when President Trump nominated Kevin Warsh as Jerome Powell’s successor, a signal markets read as potentially less dovish than expected. Recently, rising geopolitical tensions have provided additional support, a dynamic that the recent FOMC meeting further reinforced.
At the same time, inflation remains just a bit too high for comfort. If the disinflation process starts to lose momentum, markets could quickly scale back expectations for early or aggressive rate cuts.
In that scenario, the Fed would likely double down on patience, maintaining a steady stance that could, over time, offer fresh support to the Dollar.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
GBP/USD slips after blockbuster NFP revives Fed hold outlook
The GBP/USD extended its losses for the second straight day, down 0.12% after a stellar US Nonfarm Payrolls report, which could refocus the Federal Reserve on battling higher inflation that has remained above target for five years. At the time of writing, the pair trades at 1.3205.
Strong payrolls and firmer yields keep Sterling on the back foot
The US Bureau of Labour Statistics (BLS) revealed that the economy created over 178K jobs in March, crushing forecasts of 60K. Despite the positive reading, February’s print was further downwardly revised to -133K, but on a positive note, the Unemployment Rate also fell to 4.3%, down from 4.4%.
In the meantime, the US Dollar Index (DXY), which tracks the American currency’s performance versus six peers, is up a minimal 0.12% and back above the 100.00 handle amid growing speculation that the Fed would maintain steady interest rates as the Middle East conflict prolongs.
Recently, the US S&P Global Services PMI contracted in March for the first time since January 23, falling from 51.7 in February to 49.8. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, wrote: “The PMI survey data show the US economy buckling under the strain of rising prices and intensifying uncertainty, as the war in the Middle East exacerbates existing concerns regarding other policy decisions in recent months, notably with respect to tariffs.”
Williamson commented that the stagflationary environment of no growth and surging prices is a challenge for policymakers, as the S&P survey revealed a slowdown in employment.
Data from the Chicago Board of Trade (CBOT) showed investors trimmed dovish bets and predicted the Fed would hold rates flat for the year. US Treasury yields, particularly the 2-year, edged higher following the NFP release.
GBP/USD price analysis: Technical outlook
In the daily chart, GBP/USD trades at 1.3205. The near-term bias is mildly bearish as spot holds below the clustered Simple Moving Averages (SMAs) surrounding 1.3550, confirming a loss of upside momentum after repeated failures along the descending resistance trendline that started at 1.3869. Price has also slipped away from the prior series of higher supported closes along the rising trendline from 1.3035, shifting the focus toward defending recent lows rather than extending gains. The FXS Fed Sentiment Index continues to grind higher, underscoring a firmer US Dollar backdrop that keeps rallies in GBP/USD vulnerable while the pair trades beneath the broken resistance zone.
Initial resistance emerges at the psychological 1.3300 region, where prior rebounds stalled ahead of the descending trendline, followed by 1.3400 and then the 1.3500 area aligning with the grouped moving averages that cap the upside. On the downside, immediate support is at 1.3200, just below the current price, with a break exposing 1.3100 and then the 1.3035 rising trendline origin. A daily close below this latter band would confirm a deeper bearish extension, while recovery above 1.3400 would ease the immediate downside pressure and open a broader retracement toward 1.3500.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling Price This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.19% | 0.45% | -0.37% | 0.43% | -0.39% | 0.98% | 0.40% | |
| EUR | 0.19% | 0.63% | -0.22% | 0.60% | -0.20% | 1.17% | 0.59% | |
| GBP | -0.45% | -0.63% | -0.80% | -0.02% | -0.83% | 0.54% | -0.07% | |
| JPY | 0.37% | 0.22% | 0.80% | 0.81% | 0.01% | 1.37% | 0.69% | |
| CAD | -0.43% | -0.60% | 0.02% | -0.81% | -0.84% | 0.55% | -0.06% | |
| AUD | 0.39% | 0.20% | 0.83% | -0.01% | 0.84% | 1.38% | 0.75% | |
| NZD | -0.98% | -1.17% | -0.54% | -1.37% | -0.55% | -1.38% | -0.61% | |
| CHF | -0.40% | -0.59% | 0.07% | -0.69% | 0.06% | -0.75% | 0.61% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
USD/JPY weakens despite strong US NFP as intervention risks cap gains
USD/JPY trades with a mild downside bias on Friday as lingering intervention fears support the Japanese Yen (JPY), even as the US Dollar (USD) remains firm against its major peers following the upside surprise in US Nonfarm Payrolls (NFP) data. Thin liquidity conditions due to the Good Friday holiday are also contributing to muted and choppy price action.
At the time of writing, USD/JPY is trading around 159.57, easing modestly after a brief spike to 159.82 in reaction to the US labor data.
According to data released by the US Bureau of Labor Statistics, the US economy added 178K jobs in March, beating expectations of 60K, while the Unemployment Rate ticked lower to 4.3% from 4.4%. February’s figure was also revised lower to show a loss of 133K jobs, compared to the previously reported decline of 92K, highlighting recent volatility in the labor market.
Average Hourly Earnings rose by 0.2% MoM in March, below the 0.3% forecast and down from 0.4% previously. On an annual basis, Average Hourly Earnings increased by 3.5%, missing expectations of 3.7% and slowing from 3.8%.
The stronger-than-expected headline print supported expectations that the Federal Reserve (Fed) will keep rates unchanged for longer, with markets largely pricing out rate cuts amid Oil-driven inflation risks stemming from the ongoing US-Israel war with Iran.
However, business activity data painted a softer picture, with the S&P Global Composite Purchasing Managers Index (PMI) easing to 50.3 in March from 51.9 in February, marking its weakest level since September 2023. Meanwhile, the Services PMI fell to 49.8, below the flash estimate of 51.1, signaling contraction and the lowest reading in over three years.
The soft PMI print did little to weigh on the US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 100.15, extending gains for the second straight day.
Even so, USD/JPY struggles to draw support. Traders remain wary near the 160 level, as Japanese authorities have repeatedly signaled readiness to act against excessive volatility, keeping gains capped despite underlying US Dollar strength.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
EUR/USD Weekly Forecast: War headlines and US inflation update to shape markets
The EUR/USD pair finished a second consecutive week a handful of pips above the 1.1500 level, seesawing between gains and losses in line with United States (US) President Donald Trump’s rhetoric on the Middle East war. Financial markets revolved around the Iran war, paying little attention to critical US employment data.
War in the Middle East
Pessimism backed the Greenback at the beginning of the week, as the Houthis, an Iran-backed militant group in Yemen, entered the Persian Gulf conflict by launching a missile attack on Israel. The US Dollar (USD) changed course on Tuesday, as market mood improved after President Trump said the US would leave Iran in two or three weeks. Still, the USD resumed its decline on Thursday, following yet another round of Trump’s comments at a White House press conference.
Words vs facts
Beyond stating that the US would leave the Middle East in a few weeks, Trump flooded headlines.
US President Trump’s words aimed to keep Oil prices under control, as the barrel of West Texas Intermediate (WTI) once again surpassed the $100 mark. But he did not succeed. The black gold is closing the week with solid gains near $105, the highest daily close since July 2022, as pessimism rules.
President Trump claimed the US is winning the war and that they have smashed Iran. He repeated that their main goal was to destroy Tehran’s nuclear program. Trump also said he is considering pulling the country out of NATO, given allies’ reluctance to help reopen the Strait of Hormuz. He later noted the US does not need the Strait reopened and that it’s others’ problem.
At the end, facts, not his words, maintain the mood depressed.
The facts are that there is no deal with Tehran, and the country is not willing to negotiate, nor to give up. The Strait of Hormuz remains closed, although Iran seems to be working on a protocol to allow traffic through the critical bottleneck. Also, the US deployed land troops in the region, and attacks continue. By the end of the week, Trump shared on Truth Social:
With a little more time, we can easily OPEN THE HORMUZ STRAIT, TAKE THE OIL, & MAKE A FORTUNE. IT WOULD BE A “GUSHER” FOR THE WORLD??? President DONALD J. TRUMP”
US employment situation
Meanwhile, the US published employment data that could shape the Federal Reserve (Fed) monetary policy path.
The US Nonfarm Payrolls (NFP) report showed the country added 178K new jobs in March, according to data released by the US Bureau of Labor Statistics (BLS) on Friday. February’s headline, however, was downwardly revised to -133K from an initial estimate of-92K. Additionally, the Unemployment Rate ticked lower to 4.3% from 4.4%, while the Labor Force Participation Rate edged marginally lower to 61.9% from 62%. Finally, wage pressures eased, with annual growth in Average Hourly Earnings down to 3.5%, from the 3.8% posted in February.
The economic data gave the USD some air, although limited due to thin market conditions due to the Good Friday holiday.
Earlier in the week, the US also published February Retail Sales, which were up 0.6%, better than the previous -0.1%, and the ISM Manufacturing Purchasing Managers’ Index (PMI) surged to 52.7 in March from the previous 52.4.
Generally speaking, data was positive, which at the end of the day, pointed to decreasing odds of a Fed rate cut in 2026.
European inflation heats up
Across the pond, Germany released its March inflation data. The Consumer Price Index (CPI) rose 2.7% year-on-year in March after 1.9% in February, according to preliminary estimates. Meanwhile, the Harmonized Index of Consumer Prices (HICP) increased 2.8% on a yearly basis, compared to 2% in February.
Eurozone figures were equally discouraging. The region’s HICP, the European Central Bank’s (ECB) preferred inflation gauge, rose 2.5% in March after posting 1.9% in February. On a monthly basis, headline inflation arrived significantly higher at 1.2% from 0.6% in February.
The ECB has pledged to react promptly should inflation run out of control. Indeed, one discouraging monthly reading seems too little to trigger a rate hike, yet as long as the Iran war continues, the inflation risks skew to the upside, boosting the odds for interest rate hikes in the near term.
What’s next in the docket
Data these days will add to speculation about what central banks may do next.
The March US ISM Services PMI and April EU Sentix Investor Confidence will be released on Monday, while the US February Durable Goods Orders are scheduled for Tuesday.
On Wednesday, the Eurozone’s February Retail Sales and Producer Price Index (PPI) figures. On the same day, the Fed will publish the minutes of the March monetary policy meeting. The Summary of Economic Projections (SEP) released after the March meeting showed that policymakers’ median projection pointed to a 25 basis-point (bps) rate cut in 2026. Nevertheless, minutes are expected to have a limited impact on the USD, overshadowed by the latest developments in the Iran war.
Next in line, the US will publish an update of the Q4 Gross Domestic Product (GDP) on Thursday. Finally, Friday will be inflation day, as Germany will publish the final estimate of the March HICP, while the US will publish the March Consumer Price Index (CPI). Higher-than-anticipated inflation could boost speculation of a Fed interest rate hike. Later, the preliminary estimate of the April Michigan Consumer Sentiment Index will close the week.
However, at the end of the day, it’s all about the war, and developments in the Persian Gulf will continue to shape the market’s direction.
EUR/USD technical outlook
From a technical perspective and according to the daily chart, EUR/USD is bearish. Spot holds below the declining 20-day Simple Moving Average (SMA) around 1.1550, which keeps sliding under the flattened 100- and 200-day SMAs clustered near 1.1680–1.1690, keeping the broader tone pressured. The Momentum indicator turned lower and is now pressing its midline from above, while the Relative Strength Index (RSI) indicator hovers in the mid-40s after recovering from oversold conditions, still pointing to sellers holding the grip.
In the weekly chart, the risk for EUR/USD also skews to the downside. The pair remains below the 20-week SMA at 1.1677, while comfortably above the 100- and 200-week SMAs clustered near 1.12 and 1.09, which still limit a broader downtrend. Technical indicators, in the meantime, remain below their midlines, with the Momentum heading south and signaling strengthening downside pressure, and the RSI holding directionless around 45. The pair held within range for a fourth consecutive week, as investors await more clarity on the war front before compromising steeper positions.
Initial resistance emerges at 1.1600, followed by the 20-week SMA around 1.1675, reinforced by the presence of the 100- and 200-day SMAs right above it. Clearer gains beyond 1.1700 could see the pair extend its advance towards 1.1800, although at this point, it is quite an unlikely scenario. On the downside, the recent low near 1.1500 forms first support, followed by the 1.1410 region, where the pair bottomed this year. A sustained violation would expose the 100-week SMA zone just above 1.12 as the next bearish target.
(The technical analysis of this story was written with the help of an AI tool.)
GBP/USD Weekly Forecast: Solid on the surface, fragile underneath
Another bearish week for the British Pound led to the second consecutive weekly retracement for GBP/USD, which was primarily driven by geopolitical concerns rather than domestic issues, while market participants currently do not expect the Bank of England (BoE) to resume interest rate cuts this year. Instead, markets pencil in around 50 basis points of tightening by year-end.
GBP/USD: Supported by rates, but starting to look fragile
Sterling has held up reasonably well recently, but the story underneath is starting to look a bit more fragile.
At first glance, the move makes sense. Markets have aggressively repriced BoE expectations, shifting from rate cuts to the possibility of further tightening. That swing has provided a solid cushion for the British Pound, helping it outperform most of the G10 space outside of the US Dollar and commodity currencies.
But that support is doing most of the work.
Rates are carrying the story
The resilience in GBP is largely a rates story.
The front end of the UK curve has moved sharply, with markets quickly abandoning easing expectations and leaning toward further tightening. Inflation risks, particularly from higher energy prices, have taken centre stage.
That repricing has helped stabilise the pound, even as the broader macro backdrop remains far less convincing.
And that is the key issue.
A good portion of this support now looks priced in.
The macro picture is less comfortable
Step back, and the UK economy still looks vulnerable.
Growth was already on the soft side heading into the latest geopolitical shock, and the mix is now leaning more clearly towards stagflation: inflation pressure is picking up again, while activity cools and the labour market gradually loosens.
At the same time, familiar structural concerns are creeping back into view. The UK’s current account deficit and its sensitivity to higher borrowing costs are once again part of the conversation.
This scenario is where things become more complicated.
Higher short-term rates tend to support the currency. However, the rising long-end yields are indicating a completely different narrative. The recent move higher in gilts reflects growing concerns around fiscal sustainability and funding costs, and that has not historically been a supportive backdrop for GBP.
Positioning is improving, but not convincing
Positioning adds another important layer.
Speculative accounts have been clearly reducing short GBP exposure, with net shorts narrowing steadily in the last three weeks. But price action is not really confirming the shift, with Cable navigating the mid-1.3300/1.3400 area without extending meaningfully higher.
That combination matters.
This appears more like a slow short squeeze than a real buildup of bullish bets. Investors are backing off of negative bets, but they haven’t yet made a long-term commitment.
Open interest reflects a similar story: it is going down and pointing to position reduction instead of new inflows.
The main point is rather clear.
Positioning is becoming less bad, but it’s not quite good. If prices don’t follow through more strongly, this adjustment might lose speed soon, particularly if the economy becomes worse or the US Dollar gains ground.
The silent hazards of energy and politics
In the background, two threats are gradually growing.
Energy is the first thing. Prices are expected to go up since the UK imports more than it exports. This makes the trade-off between inflation and growth more difficult and keeps the stagflation tale running.
The second thing is politics. The closer the UK elections come, the more likely it is that there will be political noise. Changes in expectations regarding fiscal policy or leadership might have an immediate effect on the gilt market and, as a result, the currency.
GBP/USD: What may happen next
- Base case, rangebound with a softer tone
GBP/USD continues to trade within a 1.3200–1.3500 range, but with a slight downside bias. The BoE repricing still offers some support, but it begins to lose momentum as markets question how far tightening can realistically go in a weak growth environment. At the same time, the US Dollar remains relatively firm.
- Bull case: needs a convincing reason to occur
For a real rise, something has to change. The Dollar might weaken if US data is softer or the Fed sends a sharper dovish signal. This could let Cable go beyond 1.3500. It would also help if energy costs stabilised or if people throughout the world felt less risky. In such case, positioning may ultimately develop into real long-term accumulation.
- Bear case: Risks go down
It appears simpler to follow the road down. The US Dollar is becoming stronger, geopolitical tensions are increasing again, or UK gilts are under additional pressure, which might force Sterling to weaken. If the economy slows down or people become worried about the budget, spot might fall back into the 1.3000–1.3100 region, particularly if fresh shorts start to build up again.
What to look for
The US Dollar’s trajectory is evident for the time being, mainly via rates and Fed forecasts. Other factors include changes in Oil prices and the Middle East war, swings in UK gilt yields, and new UK statistics, especially on growth and the job situation.
Bottom line
Sterling is still holding up, but it is doing so on increasingly narrow support.
As long as the rate story dominates, GBP can remain resilient. But without a stronger macro backdrop or clearer conviction from investors, the balance of risks is starting to shift, and not in the quid’s favour.