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The pound is holding steady against the dollar as traders await key economic data and central bank guidance. Momentum is showing signs of recovery, but sentiment remains mixed amid uncertainty over the UK’s growth outlook and US rate expectations.
Pound steadies as traders eye data and policy signals
The GBP/USD pair is holding firm after a recent pullback, showing resilience ahead of key economic data releases.
On the daily chart, the pair has rebounded from the 1.3000 support level, with the 5, 10, and 30-day moving averages converging and the MACD histogram turning positive – pointing to a potential shift back in favour of buyers.
This recovery follows a strong rally from February’s low near 1.21, which was briefly interrupted by July’s correction.
Global market sentiment has been mixed. Japanese stocks have reached record highs after a 90-day extension to the US–China tariff truce, easing immediate trade tensions.
Australian equities remain close to their peaks, although the Australian dollar dipped after the Reserve Bank of Australia implemented a widely expected 25-basis-point rate cut.
For sterling, attention now turns to upcoming UK labour market data. Average pay growth in July is expected to remain steady at 5%, but hiring intentions have fallen to their weakest level since the COVID-19 pandemic, and starting salaries are rising at their slowest pace in more than four years.
Within the Bank of England, policy direction remains split – four of nine members opposed last week’s 25-basis-point cut to 4% – and markets have largely priced out the chance of another cut this year, a factor that could lend near-term support to the pound.
Still, speculative sentiment remains cautious. Commodity Futures Trading Commission data shows $2.78 billion in net short positions against the pound, a reversal from the optimism seen earlier in the year.
This shift reflects lingering doubts about the UK economy’s strength and its ability to sustain sterling’s 7% year-to-date rise.
In the US, the upcoming inflation report will be critical. Traders will be watching for signs of how tariffs under President Trump are affecting consumer prices, as well as any implications for the Federal Reserve’s interest rate path.
A stronger-than-expected reading could limit expectations for further rate cuts, potentially lifting the dollar and capping gains in GBP/USD.
Technical analysis
Since February 2025, GBP/USD has been trending higher, climbing from around 1.21 to a July peak near 1.378 before easing back to the 1.30 area.
The latest recovery has brought the pair close to 1.344, with short-term moving averages beginning to turn upwards, hinting at renewed bullish momentum.
Picture: GBP/USD rebounds toward 1.344 with moving averages converging and MACD momentum turning positive, as shown on the VT Markets app.
The MACD indicator is edging towards a bullish crossover, which could be confirmed if the pair holds above the 1.3400 level. Immediate resistance lies at 1.345–1.350, with a break higher potentially opening the way to 1.3550.
Failure to clear this zone may trigger a move back towards 1.3300 support. Price action in the coming sessions will likely be driven by US CPI data and any shifts in BoE policy expectations.
Cautious forecast
In the near term, GBP/USD appears to have room for further gains towards the 1.3500 level if UK labour market data meets or beats expectations and US inflation comes in below forecasts.
This scenario would support a more optimistic view on the pound, especially if it reinforces the idea that the Bank of England will hold rates steady for the rest of the year.
However, risks remain firmly in play. A stronger-than-expected US inflation print could revive dollar demand, particularly if it prompts markets to scale back expectations for Fed rate cuts.
Similarly, any signs of weakening UK growth – whether through disappointing job figures, slowing wage growth, or softer business sentiment – could undermine recent sterling gains.
Traders should also be mindful of broader market factors such as shifts in global risk appetite, which can amplify currency volatility.
Overall, while the technical setup hints at further upside, the pound’s next move will depend heavily on how macroeconomic data aligns with market expectations over the coming week. Caution, rather than conviction, is likely to define short-term positioning.
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