The pound started the week confidently, though the dollar could have pressured it more. Overnight, the pair rose nearly to 1.3386, but by morning it had pulled back and now stands around 1.3371. Friday's UK PMIs helped sterling, and the weekend proved calmer than feared.

Start with the external backdrop. Saturday's protests in France drew about 410,000 people, according to the interior ministry (organizers claimed around 800,000), and avoided large-scale destruction like on October 17. Additional relief came from the Middle East: Donald Trump did not launch an active war with Iran despite many media fears over the weekend. For currencies, this means lower demand for the dollar as a safe-haven. A simple thought for a beginner: when there are fewer worrying headlines, investors are less likely to flee to the dollar, and other currencies get a chance to rise.

Sterling has domestic supports beyond the external backdrop. On Friday, the UK composite PMI for October rose to 53.1 from 52.0 a month earlier — an eight-month high. The services index rose to 53.1 from 52.1, and manufacturing output climbed to 53.1 from 51.5, the highest in 25 months. Readings above 50 indicate expansion, so the acceleration was welcome news. Employment also rose for the first time in two years, and new orders grew at the fastest pace since September 2024. Business costs accelerated, and S&P Global's assessment makes a Bank of England rate hike look nearly inevitable — especially after Megan Greene on October 20 urged a rate rise at the November 5 meeting.

U.S. data gave the dollar little lift. The U.S. composite PMI was 57.6, and the manufacturing index rose to 56.0 — the best reading since May 2022 and above the 55.5 forecast — yet traders shrugged. The probability of a Federal Reserve rate hike at the next meeting is below 10%, and these figures don't change that calculus. I believe that if this picture holds, GBP/USD will remain near current levels.

The UK calendar is almost empty today; in the first half of the day, attention will focus only on the Confederation of British Industry's October retail-sales balance. This survey of retailers yields a balance — the difference between the share of firms reporting rising sales and those reporting declines. The forecast is -47, up from -55 a month earlier, so analysts expect at least a modest improvement. By comparison, Friday's GfK consumer confidence plunged to -24 versus a -14 forecast, so the market is already cautious about consumers. Thus the risk of a sharp deterioration for sterling looks limited. Friday's PMIs were strong, inflation is at 3.5%, and Megan Greene's call for a rate hike keeps the pound supported. Even if the retail balance disappoints, its effect will likely be local. I believe that in the absence of other reasons, GBP/USD will follow dollar sentiment, and the UK report will only slightly tweak the short-term tone.

Momentum

For the pound, the main reference points are 1.3390 above and 1.3361 below. At 1.3371, the price sits 19 pips below the top level and 10 pips above the bottom. The morning high near 1.3386 missed 1.3390 by only four pips, then fell back, so I don't count that first touch as a confirmed breakout. I consider long positions only after a firm close above 1.3390; then targets are 1.3416 and 1.3437. That scenario seems primary to me while the dollar lacks fresh triggers and UK data continue to support the pound. Sells below 1.3361, with targets of 1.3330 and 1.3299, become possible only if worrying news comes from Washington or Iran, since those events shift demand toward the dollar.

Mean Reversion

For the pound, the mean-reversion levels are 1.3389 and 1.3363. The upper reversion level is just one pip below the breakout-buy at 1.3390, so beginners must be especially careful—one pip is market noise, and on the first touch you cannot distinguish a reversion from a breakout. If price reaches 1.3389, then quickly bounces down and fails to hold above 1.3390, I consider selling—that's how the pair behaved overnight. If it holds above 1.3390, I won't sell; that is a confirmed breakout. The lower level 1.3363 sits two pips above the breakout-sell at 1.3361. Here, I expect price to dip below 1.3361, reach around 1.3363, fail to hold, and then return above; in that case, long positions with a stop under the false-break low are appropriate. If the price closes below 1.3361, the reversion failed and attention shifts to the 1.3330 target.