GBP/USD Breaks Higher as Markets Abandon September Fed Hike

Traders' Opinions

Summary:

GBP/USD reaches a three-month high near 1.3571 as weak US data drives Fed hike expectations sharply lower. Dollar weakness remains the main catalyst, keeping the pair’s near-term outlook bullish despite mixed UK fundamentals.

BUY GBPUSD

EXP

TRADING

1.35601

Entry Price

1.36600

1.34500

1.35634 +0.00336 +0.25%

0.0

Pips

Flat

1.34500

Exit Price

1.35601

Entry Price

1.36600

The British Pound is extending its advance against the US Dollar on Monday, pushing GBP/USD above Friday’s high and reaching a fresh three-month peak around 1.3571. The move marks a second consecutive session of gains, with Sterling benefiting primarily from a broader retreat in the Greenback.

The Dollar’s recent strength is beginning to unwind as markets increasingly question whether the Federal Reserve has any reason to raise interest rates again this year. Expectations for a September hike have fallen sharply, leaving the USD vulnerable as traders reduce previously accumulated long positions.

Last week’s US economic releases strengthened the case for patience from the Fed. Retail Sales unexpectedly contracted 0.6% in July, compared with expectations for a modest 0.1% increase, while earlier inflation figures showed that price pressures were continuing to cool. The deterioration in July employment added another warning sign, suggesting that keeping monetary conditions restrictive for longer may carry increasing risks for the economy.

Markets have responded accordingly. According to the CME FedWatch Tool, the probability of a September rate increase has fallen to roughly 30%, compared with more than 50% just a week earlier. Unless incoming data produce a meaningful rebound in inflation or economic activity, I believe the argument for another near-term Fed hike is becoming increasingly difficult to sustain.

Sterling’s domestic backdrop is less convincing. UK GDP figures confirmed moderate second-quarter growth, but the unexpected decline in July Industrial Production highlights that the economy remains uneven. This leaves the Bank of England facing its own difficult policy decision and could eventually limit how far GBP/USD can rally purely on Sterling strength.

For now, however, the Dollar side of the equation remains the dominant driver. With Fed expectations being repriced lower and GBP/USD breaking into fresh three-month highs, the near-term bias remains tilted higher. The key question is whether buyers can maintain momentum above 1.3570, which would strengthen the case for another leg higher.

Technical Analysis

GBP/USD is beginning to break free from the consolidation that dominated much of August, with buyers pushing the pair through the 1.3540–1.3560 barrier and keeping the broader recovery firmly intact. The move fits with the fundamental backdrop, as markets have cut the probability of a September Fed hike to around 30%, contributing to broad Dollar weakness.

Looking at the 4-hour chart, the structure has become increasingly constructive since the late-July bottom. Higher lows have developed consistently, while each corrective move has been met with renewed buying pressure. More importantly, price has now returned above an area around 1.3540–1.3560 that repeatedly restricted upside attempts, suggesting the balance is shifting further in favour of Sterling bulls.

Rather than expecting an uninterrupted rally from current levels, I see scope for a brief retest of the breakout area. Holding above 1.3540 would be particularly constructive, confirming that previous resistance has successfully turned into support and potentially providing buyers with another entry point.

The first significant upside obstacle sits around 1.3660–1.3670. This is the clearest resistance zone visible on the chart and represents my immediate objective for the current advance. Price may hesitate or temporarily correct once it reaches this region, but a convincing breakout would open a much larger upside window.

Beyond 1.3670, the technical picture becomes considerably more interesting. The next leg could carry GBP/USD through 1.3700, with the chart ultimately pointing toward the 1.3800–1.3820 region if bullish momentum continues to accelerate.

The downside remains relatively well protected. A move back beneath 1.3540 would initially be viewed as a normal retracement, with 1.3430–1.3450 providing the next important demand zone. Only a sustained breakdown below this area would force me to reconsider the bullish outlook and shift attention toward 1.3300–1.3320.

Overall, the breakout appears to favour continuation rather than exhaustion. With GBP/USD establishing higher lows, clearing resistance and the Dollar simultaneously losing support from Fed expectations, I expect buyers to remain active on pullbacks. The immediate focus is 1.3660, while a clean break there could set the stage for a considerably larger move toward 1.3800.

TRADE RECOMMENDATION

BUY GBP/USD

ENTRY PRICE: 1.3560

STOP LOSS: 1.3450

TAKE PROFIT: 1.3660

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GBP/USD Breaks Higher as Markets Abandon September Fed Hike

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