Why Is the British Pound Climbing to September 16 Highs as Election Results Trigger a USD Slump?

GBP/USD rallies sharply on Wednesday as selling pressure spreads across the USD.
The USD slides to a one-month low as US bond yields fall and hopes for diplomacy with Iran improve.
Expectations of a BoE rate hike support the GBP, adding strength to the rally.

Strong buying lifts GBP/USD above the mid-1.3400s during Wednesday’s Asian session, with broad US Dollar (USD) weakness driving the advance. In the past hour, the pair has reached its highest level since 16 September.

The USD Index (DXY), which measures the Greenback against a basket of currencies, has slumped to its lowest level in over a month. Early US midterm vote counts indicated a growing likelihood of a Democratic victory, increasing the prospect of political gridlock in Washington. Safe-haven flows have consequently moved towards US Treasuries, pushing bond yields down. Optimism over diplomacy with Iran is also weighing on demand for the safe-haven dollar, giving GBP/USD a substantial lift.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Optimism about a possible diplomatic settlement to end the US-Iran war strengthened after President Donald Trump told the Financial Times on Tuesday that the US had no immediate plans to strike Iran. Traders have responded by pricing out the geopolitical risk premium. Meanwhile, the British Pound (GBP) retains its relative strength as recent UK budget updates ease fiscal concerns. Growing expectations that the Bank of England (BoE) will raise interest rates at Thursday’s policy meeting are also supporting the currency.

Further Federal Reserve (Fed) policy tightening remains a prospect, supported by labour market data and inflation risks from elevated energy prices. The Labor Department’s monthly Job Openings and Labor Turnover Survey (JOLTS) showed that hiring stayed relatively stable, while job openings increased more than expected in September, rising from 7.2 million to 7.5 million. Yet these factors have offered no relief to USD bulls, indicating 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, due later in the North American session. The main attention, however, remains on Thursday’s BoE policy announcement and Friday’s closely tracked US monthly employment release, commonly called the Nonfarm Payrolls (NFP) report. With the fundamental backdrop still supportive, any corrective decline in GBP/USD is more likely to attract buying interest.

What does the GBP/USD daily chart show?

Can the bullish technical outlook hold?

An intraday move above the 200-day Simple Moving Average (SMA) at 1.3424 keeps GBP/USD’s near-term outlook bullish. The pair is also trading just above the 61.8% Fibonacci retracement at 1.3467. Having recovered the midpoint of the recent decline, buyers appear to be defending this pivotal zone.

On the upside, the 78.6% Fibonacci retracement at 1.3556 offers resistance before the recent cycle high of 1.3670. Initial support lies around the 200-day SMA at 1.3424, followed by the 50.0% retracement at 1.3404. Further down, buying interest emerges at the 38.2% level of 1.3341 and the 23.6% retracement at 1.3264, before the structural floor around 1.3138.

(An AI tool assisted in preparing this story’s technical analysis. Learn more.)

How Is the US Dollar Performing Today?

The US Dollar’s strongest performance today was against the New Zealand Dollar. The table below details the percentage change in the US Dollar (USD) against the major currencies listed.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.43%	-0.37%	-0.68%	-0.30%	-0.12%	0.11%	-0.71%
EUR	0.43%		0.06%	-0.25%	0.11%	0.29%	0.52%	-0.29%
GBP	0.37%	-0.06%		-0.30%	0.08%	0.25%	0.47%	-0.35%
JPY	0.68%	0.25%	0.30%		0.39%	0.57%	0.78%	-0.04%
CAD	0.30%	-0.11%	-0.08%	-0.39%		0.17%	0.39%	-0.43%
AUD	0.12%	-0.29%	-0.25%	-0.57%	-0.17%		0.22%	-0.60%
NZD	-0.11%	-0.52%	-0.47%	-0.78%	-0.39%	-0.22%		-0.81%
CHF	0.71%	0.29%	0.35%	0.04%	0.43%	0.60%	0.81%

Percentage movements between the major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. To read USD (base)/JPY (quote), for instance, choose the US Dollar on the left and follow that row horizontally to the Japanese Yen column. The value in the intersecting cell gives the pair’s percentage change.