GBP/USD Rate Approaches 2024 High (2024)

Above: GBP has advanced against all G10 peers in 2024.

The British Pound reigns as the best-performing G10 currency of 2024 following a retreat in the value of the U.S. Dollar.

The Pound to Dollar exchange rate is now testing 1.28, with the 2024 high located at 1.2827, courtesy of the broader retracement in the Dollar.

To be sure, the Pound is an outperformer in its own right as economic activity picks up and the Bank of England says it won't rush into a rate cut, but much of the gains in GBP/USD are owed to the bigger Dollar story.

"The US dollar has lost significant momentum in recent trading sessions and is only up against 12% of global currencies month-to-date. This is down from 43% in February and 73% in January. Cracks are starting to show in the US currency’s reign with the dollar index back below 103 for the first time since climbing above it mid-January," says George Vessey, lead FX strategist at Convera.

This week, a series of undershoots in U.S. data and surveys questioned the dollar's 2024 outperformance, for example, Wednesday's news that quit rates are slowing. This suggests the U.S. jobs market continues to slow and wages are coming down, something the Federal Reserve wants to see before cutting interest rates.

"The latest US macro data have been disappointing, with economic surprise indexes rolling over. We believe there’s a risk incoming US data could stay patchy," says Dominic Schnider, a strategist with UBS in Switzerland.

Thetestimony by Jerome Powell meanwhile boosted market bets that a June rate cut is likely."We’re waiting to become more confident that inflation is moving sustainably to 2 per cent," said Powell in an appearance before lawmakers. "When we do get that confidence, and we’re not far from it, it will be appropriate to dial back the level of restriction so that we don’t drive the economy into recession."

Entering 2024, markets thought March would be when U.S. rates would be cut for the first time, but here we are in March, and all bets are placed on June.

This retreat in expectations has boosted the Dollar, but for now, it looks like the repricing has run its course, denying the Dollar further upside.

Above: GBP/USD price action at daily intervals showing a test of a key level is underway.Track GBP and USD with your own custom rate alerts. Set Up Here

"The British pound is on track for its best week of the year versus the US dollar, rising over 1% and trading back above the $1.28 handle for the first time in 10 weeks. The 200-week moving average, which GBP/USD has been below since July 2023, is the next upside target, located at $1.2852 at present," says Vessey.

Can the Pound to Dollar exchange rate extend its gains? Firstly, we note the pair is at a key resistance level in the shape of the 1.2827 high (see chart). Expect selling interest to pick up in this region, resulting in a potential failure that could lead to another retracement back into the range.

But,this afternoon sees the release of the U.S. labour market report, and any undershoot against expectations could boost the Pound's rally against the Dollar and result in a break of resistance.

Should the data print hot, market bets for a June rate cut would recede again and propel the Dollar higher, reinforcing the technical barriers that lie in the immediate vicinity.