Cable achieved what the euro was unable to accomplish. GBP/USD continued its weekly ascent, maintaining a position above the 1.3500 mark and approaching the 1.3550 area — levels not seen in several weeks — before settling around 1.3530 amid slight selling pressure on the dollar. The pair remained constrained during the European session. It traded at 1.3500 throughout the morning, recorded a figure of 1.3507 with a 0.01% decline, and continued its sideways consolidation around the psychological level as traders remained on the sidelines. Tuesday closed at 1.3509, reflecting minimal change, as the pair exhibited a pattern of alternating gains and losses within a similar range. Then the data arrived, and sterling responded to the dollar’s weakness. Headline CPI decelerated to 3.4% year-over-year, while core inflation stood at 2.5%, both figures aligning with consensus expectations, according to the July 2026 CPI release. The Dollar Index remained in the range of 99.85 to 99.90, consistently below the 100.00 level it has struggled to regain following the disappointing payroll figures. The technical event underlying the price action is the one that holds significance. GBP/USD has successfully navigated a notable medium-term obstacle, achieving a bullish breakout subsequent to the August 7 nonfarm payrolls report. This movement has positioned the currency pair above its previous descending trendline resistance, which originated from the January 28 peak — the 52-week high. The trendline has constrained every rally for a duration of six months.
The thesis on cable represents a policy-parity trade that the market has yet to fully price in. The Bank of England maintains the Bank Rate at 3.75%, with three members of the Monetary Policy Committee voting in favour of an increase. The Federal Reserve maintains its stance at 3.50%-3.75%, with three dissenting votes reflecting a unified position among the majority. Two central banks, identical hawkish minorities, and a rate differential that remains at zero against the Fed’s ceiling and 25 basis points in sterling’s favour against its floor. That configuration has never been the typical condition for sterling. The pair engaged in trading throughout 2024 and 2025, with a differential that consistently favoured the dollar. Parity at the policy rate, alongside a US labour market shedding 23,000 jobs and a UK economy projected to grow at an annual rate of 1.1%, signifies a structural change that the consensus September target of 1.3327 fails to account for. The trade stands at 1.3547. Clear it and 1.3600 opens. Lose 1.3479 and 1.3400 returns. The US data did not present any unexpected outcomes, and this lack of surprise is what sustained demand for sterling. Headline CPI increased by 0.1% on a seasonally adjusted basis in July, following a decline of 0.4% in June, and registered a 3.4% rise over the past 12 months compared to 3.5% thru June. Core increased by 0.2% following a period of stability, and registered an annual rise of 2.5% compared to the previous figure of 2.6%. Every figure aligned precisely with the forecast to the decimal.
The pricing by the Fed had already adjusted. Pricing for the September FOMC decision appears nearly evenly split, as fed funds futures now indicate a 48.1% probability of a 25-basis-point increase, a decline from approximately 70% just a week prior. Markets have adjusted expectations for a September rate hike in light of the disappointing July payrolls report. The scenario analysis that was undertaken was clearly defined. A core print above 2.5%, driven by goods price pass-throughs, would have prompted a hawkish repricing in short-term Treasury yields and offered a significant boost for the dollar, potentially leading GBP/USD to a swift decline toward the 1.3400 psychological level. The print landed at 2.5% exactly, which neutralised that risk without generating the dollar-negative surprise that would have driven cable thru 1.3600. The composition maintains the presence of the hawks in the room. Energy has experienced a 14.7% increase over the past year, while petrol has surged by 24.6%. Airline fares experienced a monthly increase of 2.2% and an annual rise of 25.5%. Shelter accounted for two-thirds of the monthly increase. The July energy line experienced a decline of 1.5%, with petrol prices decreasing by 2.9%. However, this downward trend is expected to reverse in August, as Brent crude approaches $90 and the national average for petrol reaches $4.03 per gallon.
The July policy statement highlighted upside inflation risks, and remarks from Chair Kevin Warsh during the July press conference indicated increased apprehension about those risks. Hawkish Fed expectations persist in supporting the dollar while limiting the potential for cable’s appreciation. That is the candid assessment. The print eliminated the immediate hawkish catalyst while maintaining the hawkish bias, which accounts for sterling’s gain of 20 pips instead of 80. The forthcoming US data release is scheduled for Thursday, featuring the Producer Price Index alongside initial jobless claims, subsequent to the underwhelming payrolls report. Cable’s technical position shifted on August 7, and the market has since dedicated four sessions to affirming this change. The price action has successfully navigated a notable medium-term obstacle, executing a bullish breakout subsequent to the nonfarm payrolls release. It has ascended beyond the previous descending trendline resistance established from the January 28 peak, which concurrently signifies the 52-week high. That line had delineated the entirety of the 2026 downturn. The pair currently fluctuates within a modest ascending channel that has been in place since the low of 1.3279 on July 29, exhibiting bullish momentum as indicated by the hourly relative strength index. Short-term pivotal support is positioned at 1.3479, and maintaining this level sustains the near-term bullish sentiment.
The sequence from the base is orderly. Cable based out near 1.3280 on July 28, with the recorded low at 1.3273 and the channel origin at 1.3279 on July 29. It experienced a significant rally leading up to the central bank decisions, reaching a swing high near 1.3520 around the period of July 31 to August 1. A dotted resistance line near 1.3480 indicated the level that the rally consistently struggled to surpass. From there the pair retraced to 1.3420 to 1.3430 — significantly above the late-July base — before ascending thru August 4 and 5 to 1.34607. Subsequently, payrolls deviated from the established trendline, resulting in cable reaching 1.3530 on August 10. From 1.3273 to 1.3530 represents a movement of 257 pips over nine sessions, reflecting a 1.93% increase characterised by higher lows at each pullback: 1.3280, followed by 1.3420, and then 1.3465. That ladder exemplifies an ascending channel, and it is the reason the recent breakout thru 1.3500 indicates that the path of least resistance continues to trend upward. Longer-term context delineates the available space. The pair has been trending higher from a recent low of 1.3165 on June 24, reflecting an increase of 2.58% from that level. Over the past month, sterling has appreciated by 1.19%, although it continues to be down by 0.58% over the course of the last 12 months. The structural levels above are remote. Major tops are positioned at 1.37888 and 1.42505. The 52-week moving average is recorded at 1.31653, while the 12-month average stands at 1.31945, both figures significantly below the current spot rate. This positioning indicates a technically bullish outlook for the pair in the long term.
