British pound has been bullish over the last few weeks, as we are looking to see whether or not we can break out of a larger range. At this point, the markets will continue to pay attention to the Federal Reserve.
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GBP/USD
British pound has been bullish against the US dollar during the month of August as the bets on the Federal Reserve keeping tight monetary policy or, for that matter, tightening monetary policy continues to drop. Ultimately though, when you look at this pair going back to the month of May in 2025, this range has been defined by the 1.32 level on the bottom and the 1.37 level on the top.
Ultimately, we are in an area of inflection, and we will have to determine whether or not we are going to continue to see more of the same or a breakout to the upside. Ultimately, it's signs of exhaustion, and if we were to break down below the 1.35 level, then I think you have a situation where the British pound probably drops towards the 1.32 level again.
Range Boundaries and Monetary Policy Divergence
On the other hand, if we get a weekly close outside of the 1.37 level, then we could see a move towards the 1.40 level, but that will almost certainly be in line with the US dollar shrinking everywhere else. This has been a strong move to the upside over the last couple of months, but again, we still have this major ceiling above. This is an area that I think continues to see this area as a major factor for technical traders.
Interest rates continue to be fairly high in the United States, but they are higher in the United Kingdom as things stand right now. This is an area that I'm watching very closely, in the form of 1.37, and I think that probably tells you the overall outlook for the next couple of months. This will be an interesting pair for the month of September, and one that could give a lot of signals for other currency pairs as well.
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