Sterling appears likely to continue its upward trajectory after hitting a fresh six-month high of 1.3675 on Friday, and while recent attempts to push higher in the mid-1.36s have faced resistance, robust support near 1.3620 over the past few sessions suggests a building bullish sentiment. Markets largely brushed off Monday's announcement of more stringent U.S. sanctions on Iran, with only a minor reaction in currency markets, though oil prices dipped, indicating a favorable market reception to the news. Attention now turns to the upcoming Kansas City Fed Jackson Hole Economic Symposium, August 27-29, where Fed Chair Kevin Warsh is set to deliver the keynote address. Market participants will be keen to decipher any insights Warsh might provide regarding Fed policy this year. Futures markets indicate a more than 60% chance of a 25bp hike at the October FOMC meeting, with expectations fully priced in for December.

Traders will be eager for any hints on U.S. inflation and growth, which could influence policy. Warsh faces a delicate balance, given that his previous commitment to let the data speak disappointed markets after the last Fed rate hold. Warsh is not alone in focus. Treasury Secretary Scott Bessent has sought to guide long-term yields lower via expanded long-end U.S. Treasuries buybacks to ease fiscal fears. Should Warsh disappoint bond vigilantes—appearing too dovish against above-target inflation—the recent yield dip risks unraveling, dragging the dollar lower.

Technically, sterling finds support around 1.3620, the Friday-Tuesday low area, followed by the rising 10-DMA at 1.3575, which has provided support since early August. On the upside, initial resistance lies at Friday's six-month high of 1.3675, with further resistance at 1.3712, the February 11 daily high.
Sterling Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)