Key takeaways
- GBP/USD remains supported despite renewed tensions between the US and IranWith traders now focusing closely on the upcoming US labor market data and the University of Michigan consumer confidence numbers which could lead to near-term volatility in the pair.
- Intermarket dynamics favor further upside for the poundWith the implied interest rate spread between the UK and the US sharpening significantly, reinforcing expectations that the Bank of England may remain relatively more hawkish than the Fed.
- Technical indicators indicate that there is a potential bullish reversalAs GBP/USD rebounds from upward channel support, consolidating above the 20-day and 50-day moving averages, while momentum indicators point to strengthening bullish momentum above the 1.3530 support area.
After the pound reached a two-month high of 1.3658 on May 1, 2026 against the US dollar, the GBP/USD pair traded sideways, and on Thursday, May 7, 2026, it fell by 0.2% to hit an intraday low of 1.1723 on the back of escalating tensions between the US and Iran after the two sides exchanged fire.
In addition to the latest developments surrounding the US-Iranian conflict, where the markets Waiting for Iran’s response to Washington’s latest proposal In order for the Strait of Hormuz to reopen, traders will also be closely monitoring several key US economic releases today which may impact the short-term direction of the GBP/USD pair.
These include April Nonfarm payrolls and Unemployment rate Data is at 8:30pm Singapore time, followed by preliminary data University of Michigan Consumer Confidence May report at 10:00pm Singapore time.
Interestingly, internal and technical factors now support a potential bullish reversal for GBP/USD at this point.
Let’s unpack in more detail.
The spread of the implicit interest rate policy curve has worsened in the UK and the US
Figure 1: Spread of the implied interest rate policy curve between the UK and the US as of 7 May 2026 (Source: MacroMicro).
Interest rate futures markets indicate that the Bank of England (BoE) is likely to raise interest rates in July after remaining on hold at 3.75% since December 2025.
The current implicit interest rate policy curve in the euro area and the United States for the period from June 2026 to September 2026 has worsened significantly.
In addition, the curve has also shifted upward, with the current reading for September 2026 at 0.66% compared to 0.16% three months ago (see Figure 1).
These observations suggest that the Bank of England is likely to be less dovish or more hawkish than the Fed, which in turn could provide support for a stronger GBP/USD pair.
Implied future monetary policy monthly interest rate curves for the UK and the US are calculated using short-term interest rate futures which are highly sensitive to expectations regarding the monetary policies of each of the central banks in these countries.
Let us now focus on the short-term path (one to three days) of the GBP/USD pair from a technical analysis perspective.
GBP/USD – holds above 1.3530, watch 1.3640/3665 range resistance next
Figure 2: GBP/USD secondary trend as of May 8, 2026 (Source: TradingView).
Directional bias: Bullish above 1.3530 Pivotal short-term support Within the uptrend phase (see Figure 2).
Resistance: 1.3590, 1.3640/3665 (bullish trigger), and 1.3730
Supports the following: 1.3490 and 1.3450
Key elements to support the near-term bullish bias in GBP/USD
- Price action managed to stage a rebound after retesting the lower limit of the medium-term ascending channel starting from the April 6, 2026 low.
- Price action continues to trade above the 20-day and 50-day moving averages, supporting the ongoing uptrend phase in the medium term.
- The hourly RSI momentum indicator has just broken out of the oversold zone (below 30 level) in the Asian session today (Friday, May 8, 2026).
