The British pound against the US dollar saw a slight pullback during early Asian trading on Wednesday, with the pair hovering around 1.3630, retreating from the prior session's highs yet still holding near its six-month peak. There are no clear signs of a trend reversal at the moment, with investors largely adjusting their positions ahead of the release of key US inflation data.

The upcoming US July PCE figures, along with Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole symposium, are set to be the core variables determining the next directional move for GBP/USD. Recent US macroeconomic data has painted a mixed picture, but overall it has tempered market expectations for further near-term policy tightening by the Fed. With US inflation pressures easing somewhat and the labor market no longer exhibiting the same level of strength as before, the market is gradually shifting towards pricing in the Fed holding its policy rate steady at its September 15-16 meeting. This shift in rate expectations is directly impacting the dollar's performance.

As the market scales back bets on near-term US rate hikes, US Treasury yields are coming under pressure, diminishing the dollar's interest rate advantage. Furthermore, following the US Treasury's expansion of its long-dated bond buyback operations, the market is reassessing the supply-demand dynamics for longer-dated Treasuries, leading to downward pressure on long-end yields and adding further pressure on the dollar. The market is also paying attention to the possibility that the Treasury could utilize its nearly $1 trillion cash balance to fund an expansion of these long-dated bond buybacks. While this could alleviate supply pressures in the long end in the short term, it may also push long-term yields lower. For GBP/USD, as long as US yields fail to resume a rapid upward trajectory, the dollar is unlikely to stage a sustained trend rebound.

Meanwhile, the Fed's policy communication itself has become a point of market focus. Analysts at DBS Bank suggest that recent moves in US yields have exposed a void in the Fed's policy communication, with the market needing greater clarity on how future policy will guide rate expectations and to what extent the Fed can tolerate rising long-term yields. If policy communication continues to lack clear direction, the dollar could face additional pressure on confidence grounds. This elevates the importance of the US PCE data. If core PCE continues to cool, the market may further pare back bets on higher US rates, potentially weighing on both Treasury yields and the dollar, giving GBP/USD a chance to break above the 1.3660-1.3665 region. Conversely, a significant upside surprise in core inflation could revive rate hike expectations, and a dollar rebound would put short-term pressure on the pound.

Changes in energy prices are also altering US inflation expectations. International crude oil prices have recently fallen to near two-week lows, driven by expectations of resumed commercial shipping through the Strait of Hormuz and progress in US-Iran diplomatic efforts. Lower energy prices suggest that future US inflation pressures may ease further, thereby reducing the market's expectation for the Fed to maintain high rates. However, the impact of lower energy prices on GBP/USD is not entirely one-sided. While falling oil prices typically help lower global inflation risks and thus support risk assets, if the market interprets the drop as a signal of weakening global demand, it could undermine overall risk appetite, indirectly increasing the dollar's safe-haven demand. Therefore, the pound's ability to sustain its strength still depends on how the market interprets energy price movements.

Geopolitical risks remain a significant variable for the dollar's short-term trajectory. The recent restart of negotiations over shipping arrangements in the Strait of Hormuz has alleviated market concerns regarding energy transport risks. If diplomatic progress continues, safe-haven demand for the dollar could decline, further improving the external environment for GBP/USD. However, if the situation deteriorates again, demand for the dollar as a traditional safe haven could quickly resurge, capping the pound's upside potential.

From the UK's own fundamental perspective, the pound's current support is coming more from the dollar side rather than from a clear acceleration in British economic growth. Consequently, the current rally in GBP/USD exhibits characteristics of a 'weak dollar trade'. If future US data strengthens the dollar while UK economic data fails to improve in tandem, the pound could quickly give back its recent gains.

Overall, GBP/USD maintains a bullish structure for now, but has entered a phase of macroeconomic data verification. The primary risk for the bulls is not the technical structure itself, but rather whether the US PCE data and Fed policy signals will reignite expectations for higher US rates. On the daily chart, GBP/USD retains a clear bullish bias, trading above key medium-term moving averages, with a series of higher highs and higher lows still intact. However, the pair is currently approaching the 1.3660-1.3665 supply zone, which represents the core resistance in the near-term tug-of-war. A decisive daily close and sustained hold above 1.3665 could open up further upside, with the next targets at 1.3700 and 1.3750, and potentially a test of 1.3800 in a strong scenario. Conversely, repeated failures to break this zone could encourage profit-taking at higher levels, potentially pulling the pair back towards 1.3600. Initial support lies at the 1.3600 psychological level; a break below this could extend the short-term correction towards the 1.3550-1.3560 region. If this area also fails to provide support, GBP/USD could seek new buying interest around 1.3500. Given the still-bullish technical structure, pullbacks are better interpreted as corrections within an uptrend rather than an immediate confirmation of a medium-term reversal, as long as 1.3550 holds.

On the 4-hour chart, the short-term bullish structure for GBP/USD remains intact, but the price is facing notable resistance in the 1.3660-1.3665 zone, with short-term momentum appearing to wane. A fresh break and hold above 1.3665 would likely empower the bulls again, targeting 1.3700 initially and then 1.3750. However, a failed rally and a break below 1.3600 would significantly increase 4-hour correction pressure, potentially leading the price back towards the 1.3550 area. Therefore, 1.3665 stands as the most critical confirmation level; a break signals trend continuation, while rejection points to a higher risk of range-bound trading and pullbacks.

The pound is currently in a relatively strong position, but the primary driver of its recent gains is dollar weakness rather than a clear improvement in UK fundamentals. Cooling US inflation, falling Treasury yields, and expectations for the Fed to hold rates steady in September provide a favorable external environment for the pound. Simultaneously, lower crude oil prices and reduced risk in the Strait of Hormuz have diminished some of the dollar's safe-haven appeal. In the near term, the 1.3660-1.3665 area is the key battleground for whether GBP/USD can unlock further upside. If US PCE data comes in below expectations and the Fed signals a dovish stance, a break above this zone could see the pair advance towards 1.37 and 1.3750. Conversely, if PCE data shows inflation stickiness or the Fed delivers a hawkish surprise, a dollar rebound could push GBP/USD back down to 1.36 and 1.3550. Given that the pair is trading near six-month highs, the risk of chasing the rally is significantly elevated. Going forward, the focus should be on US PCE data, Treasury yields, the dollar index, and policy signals from Jackson Hole, as these factors will determine whether the pound's current strength can be sustained.