The British pound stumbled against the US dollar on Tuesday, with the GBP/USD pair falling 0.7% to hover near $1.3450. This pullback erased part of last week’s strong rally that had briefly pushed the pair past a three-year high. The decline began quietly but accelerated through the European session, surprising some traders in a market lacking any major economic data or central bank updates. Much of the move appeared to be driven by profit-taking and unwinding of bullish positions, especially as US trade officials arrived in London for negotiations.

Despite the silence on the economic front, the dollar gained strength across the board, dampening sterling’s momentum. Traders had been eyeing a possible breakout above the $1.36 level, but without fresh catalysts and with broader dollar resilience creeping in, GBP/USD lost steam. Some analysts suggest this retreat may reflect a recalibration of market expectations, particularly as investors re-evaluate how much upside is left for the pound after a 9% rally over the past four months.

In a market as sensitive as forex, sometimes no news is the news. With UK inflation still running hot and the Bank of England in no rush to cut rates, interest rate dynamics remain a key theme. However, with the Fed also holding rates steady, the dollar has found its footing — making it tougher for sterling to extend gains. The lack of UK data this week further exposes GBP to external drivers, particularly from the US side.

Traders now turn their focus to upcoming US macro releases — including CPI, PPI, and jobless claims — for the next cue on dollar direction. Until then, sterling looks likely to consolidate below $1.35, with global sentiment and risk appetite setting the tone. While the immediate breakout attempt has fizzled, contrarian traders remain alert, watching for another chance to test the $1.36 ceiling if market conditions turn supportive.