The British pound remains under pressure as GBP/USD struggles to hold near 1.2650, weighed down by a stronger U.S. dollar and rising Treasury yields. Investors are flocking to the greenback as risk aversion intensifies, pushing yields higher and dampening demand for riskier assets.
The surge in U.S. Treasury yields has been driven by expectations of a prolonged period of elevated interest rates. Federal Reserve officials continue to signal a cautious stance on rate cuts, reinforcing the dollar’s strength and making it harder for the pound to regain traction. Meanwhile, weaker sentiment in global equity markets has further exacerbated risk-off flows.
Despite the pound’s struggles, economic data from the UK remains a key factor for traders. Recent inflation and labor market figures suggest that the Bank of England may need to keep rates higher for longer, but concerns over slowing growth have kept investors wary. Any unexpected shifts in monetary policy expectations could trigger fresh volatility in the currency pair.
Market participants are also closely watching geopolitical developments and broader macroeconomic trends. Persistent uncertainty around global trade and economic growth prospects have added to the pound’s vulnerability, as investors prioritize safe-haven assets like the U.S. dollar and government bonds.
Looking ahead, upcoming U.S. economic data releases, including inflation and employment reports, could provide further direction for GBP/USD. A stronger-than-expected U.S. jobs report could reinforce the Fed’s hawkish outlook, driving the dollar even higher and putting additional pressure on the pound.
As risk sentiment remains fragile, GBP/USD is likely to stay on the defensive in the near term. A sustained break below 1.2620 could open the door for further downside, while a recovery above 1.2700 may signal a shift in momentum for the pair.
