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The dollar turned lower in sympathy with the broader trend.

The pound to dollar exchange rate trades a quarter of a per cent higher midweek at 1.3517 as last week's base-forming stability evolves into a nascent recovery.

"Sterling has nudged back above $1.35, helped more by dollar weakness as markets lean into a bearish USD narrative, driven by rising policy uncertainty and a sense that global investors are trimming US exposure after years of outperformance. Although GBP/USD is down more than 2.5% from its January peak of $1.3868, the pair still sits in the top 15% of its three‑year range," says George Vessey, Lead FX and Macro Strategist at Convera.

Last week's low at 1.3433 forms the interim base and confirms the nearby rounded number of 1.3450 as the obvious graphical support zone. The subsequent recovery off this floor makes for a more constructive setup and the prospect of a recovery above 1.3550 in the coming days.

Dollar losses are moving the pair forward, but there's no real catalyst to the move. In fact, on paper, the dollar should be higher: 2-year U.S. bond yields rebounded from below 3.44% to close the day near 3.46% while the benchmark 10-year yield lifted off the lows near 4.02%.

Higher bond yields should in theory aid the dollar in a FX market driven by the hunt for yield.

Investor risk sentiment recovered as many AI-linked stocks rebounded from another Anthropic-linked scare. Rising stocks would typically imply textbook dollar weakness as it is traditionally considered a safe-haven currency that falls when stocks rise.

But over recent months the dollar's relationship with risk has broken down markedly, meaning there's no dependable relationship between the dollar and the sentiment of investors, as was the case in the past.

For sure, structural market shifts and unorthodox U.S. policy under the Trump administration are playing their part.

Analysis from Barclays shows there's an "ongoing rotation into RoW equities and their outperformance. But the latest episode has been driven largely by the AI scare exacerbating the divergence between new vs. old economy sectors/regions."

There's a notable bid by U.S.-based investors going into Europe, helped by improving domestic economic activity.

So we're left holding onto the view that the dollar just wants to trend lower in sympathy with a consensus view that looks for ongoing USD underperformance, with periods of strength tending to naturally fizzle out and yield to the broader trend.

For pound-dollar, that means higher levels over the multi-week timeframe.