British Pound jumps as Treasury buyback weakens the US Dollar

On Wednesday, the British Pound surged against the US Dollar, driven by the US Treasury's increased liquidity support through a buyback of longer-dated bonds. The GBP/USD exchange rate rose to 1.3610, bouncing from daily lows of 1.3523. This move came after US 30-year yields hit their highest level since 2007, as US Treasury Secretary's announcement caused US yields to fall.

The US Dollar Index (DXY) also dropped 0.84% to 98.80, nearing levels last seen at the end of May. The rise in US yields was attributed to higher-than-anticipated inflation expectations due to increased oil prices from the unresolved US-Iran conflict. US Ambassador to Israel stated that a full-scale war against Iran is still a possibility, though he added that efforts are underway to create a mechanism with Syria, Israel, and Turkey to ease tensions.

Traders are now eagerly anticipating the release of the Federal Reserve's most recent meeting minutes, particularly with the absence of communication from new Fed Chair Kevin Warsh. Inflation in the UK showed mixed results in July, with headline CPI rising from 2.6% to 2.9%, while core CPI remained steady at 2.6%, slightly above the expected 2.5%.

The Bank of England (BoE) is expected to consider a rate hike at the September meeting, with markets pricing an 80% chance of a hold and a 20% chance of a 25-basis-point increase. GBP/USD is currently trading at 1.3606 and shows a bullish near-term bias, as the pair is on an upward support trend line at 1.3606. Technical indicators suggest strong but possibly overextended upside momentum, with support at the current trend-line pivot around 1.3606 and resistance at the reclaimed downtrend line near 1.3501.

Deeper pullbacks would meet structural demand at the triple moving average cluster around 1.3386 and the lower rising trend-line break at 1.3362.