FX.co ★ GBP/USD Smart Money Analysis – June 22nd: The British Pound Strengthens on Monday

GBP/USD generally continues its downward movement, but the pound posted a strong rally on Monday. This move could only have occurred for one reason—the resignation of UK Prime Minister Keir Starmer. This is not the first time a British prime minister has left office ahead of schedule. The previous six prime ministers were also forced to leave Downing Street before completing their terms.

It can be assumed that the market reacted positively to Starmer's departure, as EUR/USD showed no comparable gains on Monday. However, it is still far too early to talk about the end of the bearish phase. No reversal signals have formed, no liquidity grab below the March 31 low has occurred, and no bullish patterns have emerged. Furthermore, it was impossible to anticipate Starmer's resignation on Monday—or the market's positive reaction to it. It is worth recalling that just a few weeks ago traders were actively selling the pound following reports of the Labour Party's poor performance in local elections.

Therefore, today's rally in the pound may prove short-lived, and there was no practical way to position for it in advance. The latest pattern—a bearish imbalance—still gives traders grounds to expect another decline and to look for short opportunities rather than long positions.

The U.S. dollar tends to perform better than the euro and the pound during periods of geopolitical tension. Consequently, both the euro and the pound may still receive support if risk appetite improves. At the moment, the market remains cautious regarding the agreement between Iran and the United States and is waiting for the full reopening of the Strait of Hormuz, which is not an easy task in itself.

However, it can now at least be said that the war has officially ended—at least for the time being. The Fed triggered a strong rally in the U.S. dollar, but I still do not see what could allow bears to maintain their pressure. In my view, the broader trend remains bullish despite the pair's substantial declines this year.

The technical picture is currently as follows. Last week, a new bearish imbalance (21) formed. Therefore, traders may use the market's reaction to this pattern as a basis for opening short positions. I would also note the proximity of the March 31 swing low, where a liquidity grab may occur. If that happens, bulls could launch a counterattack based on the combination of factors. For now, however, the local technical picture remains bearish.

There was no significant economic news on Monday, but reports of Keir Starmer's resignation triggered a strong bullish move. Whether this rally will prove sustainable remains unclear. A bearish pattern remains overhead, so my short-term outlook remains bearish.

The broader fundamental backdrop continues to suggest that, in the long run, I can expect little other than U.S. dollar weakness. The conflict between Iran and the United States has not changed that outlook. Neither has the possibility of further Fed rate hikes. Geopolitical tensions temporarily reminded the market of the dollar's safe-haven status, but the overall environment for the U.S. currency remains less favorable.

The Fed intends to raise interest rates in 2026, which is supportive for the dollar. However, it should not be forgotten that tighter monetary policy will slow the U.S. economy. I also believe that any Fed tightening will be a temporary measure aimed at bringing inflation down quickly, after which the Federal Reserve will return to an easing cycle.

Therefore, in my opinion, any strength in the dollar is temporary. Nevertheless, traders should not ignore the technical picture, which currently indicates a fairly high probability of further declines in GBP/USD over the coming weeks. If the technical outlook turns bullish, both the fundamental and technical factors would then point in the same direction.

News Calendar for the United Kingdom and the United States

• United Kingdom – Manufacturing PMI (08:30 UTC)
• United Kingdom – Services PMI (08:30 UTC)
• United States – Manufacturing PMI (13:45 UTC)
• United States – Services PMI (13:45 UTC)

The June 23 economic calendar contains four notable releases, with the UK PMI reports being the most important. Economic data is likely to influence market sentiment on Tuesday.

GBP/USD Forecast and Trading Advice

The long-term outlook for the pound remains bullish, but at present the only active pattern is the bearish imbalance (21). Therefore, traders should focus on the market's reaction to this pattern and the possibility of another decline if they are looking for new trading opportunities.

If this pattern generates a fresh sell signal, the pound could decline toward the bullish trend invalidation level at 1.3007. The only argument currently favoring the bulls is the proximity of the 1.3158 low, where a liquidity grab may occur. However, as of now, liquidity below that low has not been taken.