GBP/USD Bulls Target 1.40 as Dollar Weakens on Policy Divergence

GBP/USD has surged to 1.3490, gaining momentum as the US dollar faces broad-based weakness to start 2026. The pair's bullish trajectory is supported by diverging monetary policy expectations between the Bank of England and Federal Reserve. Markets are pricing in a more hawkish stance from the BoE amid persistent UK inflation concerns, while anticipating potential Fed rate cuts later this year. Technical indicators suggest strong bullish momentum, with the pair breaking above the 1.3450 resistance level that had capped gains in late 2025. The next major resistance lies at the psychological 1.40 level, representing a potential 3.8% upside from current levels. Support has formed at 1.3420, coinciding with the 50-day moving average. Traders should monitor upcoming UK inflation data and Fed officials' commentary for further directional cues, as sustained dollar weakness could accelerate the pound's advance toward multi-year highs.