GBP/USD Climbs Toward 1.35 as Traders Weigh BoE Rate Path

Summary:

Sterling rebounded modestly against the U.S. Dollar on Monday, with GBP/USD hovering near 1.3480, as softer U.S. Treasury yields and growing uncertainty over Fed policy weighed on the Greenback.

BUY GBPUSD

Close Time

CLOSED

1.34998

Entry Price

1.38000

1.33500

1.33860 +0.00095 +0.07%

21.2

Pips

Profit

1.33500

1.35210

Exit Price

1.34998

Entry Price

1.38000

The British Pound posted a modest advance against the U.S. Dollar on Monday, as risk appetite returned to the market amid sliding U.S. Treasury yields and fading momentum behind the Greenback. The GBP/USD pair traded near 1.3480 in the American session, extending a shallow recovery from last week’s consolidation zone. Market participants are now positioning themselves for a pivotal week marked by key U.K. and U.S. economic releases, as well as renewed focus on the Bank of England’s monetary stance ahead of its August 7 decision.

The rebound in Sterling comes as the U.S. Dollar faces broad-based weakness, with the Dollar Index (DXY) slipping to 98.10, marking its second straight session in the red. The retreat is largely attributed to a sharp pullback in U.S. Treasury yields, particularly the 10-year benchmark, which has now fallen for four consecutive sessions to around 4.40%. Although recent U.S. economic data has remained broadly resilient, dovish tones from Federal Reserve officials and intensifying trade tensions have taken the wind out of the Dollar’s sails.

Investors remain on edge over the trajectory of U.S. monetary policy. While markets have largely priced in a pause at the Fed’s next meeting, uncertainty persists over whether policymakers will resume rate cuts in the latter part of 2025. Conflicting signals from Fed members have added to the confusion. Some have argued for a data-driven approach in response to sticky inflation, while others are flagging downside risks tied to global trade frictions and geopolitical developments, both of which have contributed to a more cautious Dollar outlook.

In the U.K., Sterling’s near-term performance is being driven by a similarly complex macroeconomic backdrop. Last week’s data painted a bifurcated picture of the British economy. On one hand, inflation surprised to the upside, with the June Consumer Price Index rising to 3.6%, well above the Bank of England’s 2% target. On the other hand, signs of labor market weakness emerged, with unemployment ticking up to 4.7% and payroll employment figures declining — both indicators suggesting a loosening job market and potential softening in domestic demand.

This divergence has made the BoE’s August 7 policy decision harder to handicap. According to Reuters, money markets are now pricing in a nearly 70% probability of a 25-basis-point cut at the August meeting, which would bring the Bank Rate down to 4.00% from the current 4.25%. Additionally, expectations for total easing in the second half of 2025 have grown, with traders forecasting 50 to 75 basis points of cumulative cuts. However, inflation’s persistence remains a thorny issue for policymakers. With core prices still elevated and services inflation yet to cool significantly, the BoE may be reluctant to act too aggressively, supporting a cautiously optimistic tone for Sterling in the near term.

Market participants will be closely monitoring the release of Thursday’s preliminary S&P Global Purchasing Managers’ Index (PMI) data and Friday’s U.K. retail sales figures. The PMIs will provide a crucial read on business activity across services and manufacturing, while retail sales will offer insight into consumer resilience. Better-than-expected figures could encourage a reassessment of rate cut expectations and offer further support to the Pound. Conversely, disappointing readings may cement the market’s dovish tilt and place renewed downward pressure on GBP/USD.

Technical Analysis

From a technical standpoint, the GBP/USD pair remains in consolidation mode, holding steady at a critical intraday and daily support area. The price structure is not yet decisively bullish, but the recent pause in selling has laid the groundwork for a potential upward move — if confirmed by technical breakout patterns. On the 4-hour chart, a close above the current horizontal resistance zone would serve as a strong confirmation of a bullish breakout. If such a move materializes, the pair may target the 1.3800 area, representing the next major resistance.

However, this setup remains vulnerable to invalidation. Should the pair print a new lower low on the 4-hour chart, the near-term bullish thesis would be negated, potentially opening the door for another leg lower.

TRADE RECOMMENDATION

BUY GBPUSD

ENTRY PRICE: 1.3500

STOP LOSS: 1.3350

TAKE PROFIT: 1.3800

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GBP/USD Climbs Toward 1.35 as Traders Weigh BoE Rate Path

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