• GBP/USD strengthened on Thursday as short-covering accelerated after the pair broke above the key 1.3410 resistance level.
• The move reflected traders unwinding bearish positions, helping sterling reach its highest level since June 17.
• Sterling also drew support from improving political sentiment in the UK, with investors expressing optimism over Andy Burnham's expected leadership transition ahead of the scheduled July 20 change in the office of Prime Minister.
• The UK political backdrop, while still fluid, has become somewhat less unsettling since PM Keir Starmer's resignation; the picture now turns on the resignation of Reform Party leader Nigel Farage and his subsequent reelection bid.
• Meanwhile, money markets are currently pricing in at least one more interest rate hike from the Bank of England this year, while the probability of a second increase has eased to around 25%.
• Immediate resistance is located at 1.3481(50%fib), any close above will push the pair towards 1.3518(Higher BB)
• Strong support is seen at 1.3327(38.2%fib) and break below could take the pair towards 1.3301(Lower BB).
Recommendation: Good to buy around 1.3400, with stop loss of 1.3360 and target price of 1.3470
