GBP/USD Finds Its Feet as UK Growth Beats Expectations

Traders' Opinions

Summary:

GBP/USD recovers toward 1.3500 as fading Fed rate-hike expectations pressure the US Dollar, while stronger UK growth provides additional support to Sterling. US PPI data is the next major test for the pair.

BUY GBPUSD

EXP

TRADING

1.35000

Entry Price

1.38000

1.33600

1.34816 -0.00123 -0.09%

0.0

Pips

Flat

1.33600

Exit Price

1.35000

Entry Price

1.38000

GBP/USD has erased its earlier losses on Thursday, recovering toward the 1.3495 region as investors increasingly scale back expectations for another near-term Federal Reserve rate hike. Sterling is also drawing support from stronger-than-expected UK economic data, allowing the pair to shrug off some of the risk aversion surrounding ongoing Middle East tensions.

The US Dollar Index has slipped toward 99.90 as traders focus on diminishing inflation risks and signs of weakness in the US labor market. Markets now see close to a 60% probability that the Fed will leave interest rates unchanged in September, compared with just over 30% a month ago.

Wednesday’s US CPI report reinforced that shift without delivering a major surprise. Headline inflation eased to 3.4% year-on-year, while core CPI slowed to 2.5%. Monthly increases of 0.1% and 0.2%, respectively, were broadly in line with expectations, suggesting inflation remains above the Fed’s target but is not experiencing the renewed acceleration that would make another rate increase immediately necessary.

Attention now turns to US Producer Price Index data. Headline and core PPI inflation are expected to cool to 4.9% and 4.2% year-on-year, respectively. Another benign inflation report could strengthen the case for the Fed to remain on hold and place additional pressure on the Dollar.

Sterling, meanwhile, received its own boost from UK growth figures. The economy expanded 0.3% month-on-month in June, beating expectations for a 0.1% contraction, with services activity rising 0.4%. Second-quarter GDP nevertheless came in at the expected 0.4%, slightly above the Bank of England’s 0.3% projection.

The combination of resilient UK growth and fading expectations for an imminent Fed hike provides GBP/USD with a supportive near-term backdrop. The UK figures are probably not strong enough to dramatically alter the Bank of England outlook, but they reduce concerns over economic weakness. If US inflation pressures continue to moderate, Sterling could make a more convincing attempt to establish itself above the psychologically important 1.3500 region.

Technical Analysis

GBP/USD continues to build a constructive bullish structure on the 4-hour chart, with the pair maintaining the sequence of higher lows that has developed since the late-July rebound from the 1.3280 region. Price is currently trading around 1.3495 and is once again testing an important resistance zone around 1.3470–1.3500, an area that has repeatedly influenced price action over the past several months.

The latest pullback from around 1.3540 has so far been relatively shallow, with buyers quickly returning around the 1.3470 region. This suggests the decline is more consistent with a corrective retest than a meaningful change in direction. Holding above this former resistance area would strengthen the argument that it is transitioning into support and provide a firmer foundation for another push higher.

The immediate hurdle remains the recent swing high around 1.3530–1.3550. A decisive break above this area would confirm another higher high and strengthen bullish momentum, leaving relatively limited technical resistance before the major 1.3650–1.3670 supply zone. This represents the next significant upside target visible on the chart.

A sustained break through 1.3670 would represent a much stronger bullish continuation signal. Such a move could clear the way toward 1.3700 initially, followed by the 1.3780–1.3800 region if momentum accelerates.

On the downside, the 1.3470–1.3450 area remains crucial. A temporary dip into this zone would not invalidate the bullish structure, but a sustained break below it could trigger a deeper correction toward 1.3400. More significant support is located around 1.3290–1.3320, and only a move beneath this region would seriously undermine the broader recovery structure.

Overall, GBP/USD continues to favor buyers. In my view, the latest weakness represents a retest of former resistance rather than the beginning of a bearish reversal. As long as the pair remains supported around 1.3450–1.3470, another attempt at 1.3550 remains likely, with a successful breakout potentially opening the path toward the 1.3650–1.3670 region.

TRADE RECOMMENDATION

BUY GBP/USD

ENTRY PRICE: 1.3500

STOP LOSS: 1.3360

TAKE PROFIT: 1.3800

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GBP/USD Finds Its Feet as UK Growth Beats Expectations

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