British Pound climbs to September 16 highs as election results trigger USD sell-off

• Broad USD selling drives a strong advance in GBP/USD on Wednesday.
• Lower US bond yields and hopes of diplomacy with Iran send the USD to a one-month low.
• Expectations of a BoE rate rise support the GBP, adding impetus to the rally.

Above the mid-1.3400s, GBP/USD reached its highest level since 16 September in the past hour. Strong buying during Wednesday’s Asian session has driven the advance against a broadly weaker US Dollar (USD).

Early counts in the US midterm elections indicated a growing likelihood of a Democratic victory, sending the USD Index (DXY), which measures the Greenback against a basket of currencies, to its lowest level in more than a month. The increased prospect of political gridlock in Washington has encouraged safe-haven flows into US Treasuries, pushing bond yields down. Optimism over diplomacy with Iran has also reduced demand for the dollar’s safe-haven qualities, lending substantial support to GBP/USD.

Optimism about a possible diplomatic settlement to end the US-Iran war grew after President Donald Trump told the Financial Times on Tuesday that the US had no immediate plans to strike Iran. Traders consequently moved to remove the geopolitical risk premium from prices. Meanwhile, the British Pound (GBP) continues to outperform as fiscal concerns ease following the latest UK budget updates. Increasing expectations that the Bank of England (BoE) will raise interest rates at Thursday’s policy meeting are also supporting sterling.

September job openings increased from 7.2 million to a higher-than-expected 7.5 million, while hiring remained relatively stable, according to the Labor Department’s monthly Job Openings and Labor Turnover Survey (JOLTS). Alongside the inflation risks posed by elevated energy prices, these figures reinforce the prospect of further monetary tightening by the Federal Reserve (Fed). Yet dollar bulls have gained no relief, suggesting that GBP/USD’s path of least resistance remains upwards.

For near-term direction, traders will turn to the US ADP private-sector employment report and the ISM Services PMI later in the North American session. The main focus remains Thursday’s BoE policy announcement, followed on Friday by the closely followed US monthly employment figures, commonly known as the Nonfarm Payrolls (NFP) report. With the fundamental backdrop still supportive, however, any corrective decline in GBP/USD is more likely to attract buyers.

GBP/USD advances on the daily chart

GBP/USD retains a bullish technical bias

An intraday break above the 200-day Simple Moving Average (SMA) at 1.3424 leaves GBP/USD with a bullish near-term outlook. The pair is also trading just above the 61.8% Fibonacci retracement at 1.3467. Having recovered the middle of the recent decline, buyers appear to be defending this pivotal area.

On a further advance, the 78.6% Fibonacci retracement at 1.3556 offers resistance before the recent cycle peak at 1.3670. Initial support lies near the 200-day SMA at 1.3424, followed by the 50.0% retracement at 1.3404. Further down, demand emerges at the 38.2% level at 1.3341 and the 23.6% retracement at 1.3264, before the structural floor around 1.3138.

(The technical analysis of this story was written with the help of an AI tool. Know more.)