GBP/USD is experiencing modest gains, hovering around 1.3500 during the early hours of Thursday’s Asian session. US CPI inflation exhibited modest levels in July, leading to a reduction in expectations for a rate hike by the Federal Reserve in September. Traders are poised for the release of the UK Q2 GDP and US PPI reports later on Thursday, seeking new momentum. The GBP/USD pair moves modestly upward, approaching 1.3500 in the early hours of trading on Thursday in Asia. The US Dollar softens against the British Pound on a tame reading of the US inflation report. Traders will pay close attention to the preliminary reading of the UK Gross Domestic Product for the second quarter (Q2) and the US Producer Price Index data, which are scheduled for release later on Thursday. A key inflation reading on Wednesday indicated a moderation in prices across a variety of goods and services, thereby diminishing the likelihood of an interest rate increase from the US Federal Reserve in the upcoming month.
The US Consumer Price Index experienced a year-over-year increase of 3.4% in July, compared to a previous rate of 3.5%, as reported by the Bureau of Labour Statistics on Wednesday. Meanwhile, the core CPI, excluding food and energy, registered a year-over-year increase of 2.5% in July, down from 2.6% in June. Both readings aligned with expectations. In July, the monthly inflation rates for the headline CPI and core CPI stood at 0.1% and 0.2%, respectively. Traders have reduced the likelihood of a September rate hike, bringing the probability down to 40%, as indicated by the CME FedWatch tool. Federal Reserve officials will receive the August Consumer Price Index and employment reports prior to their meeting in September. The UK Q2 GDP data will be the focal point later on Thursday. The UK economy is anticipated to expand by 0.4% quarter-on-quarter in the second quarter, following a robust 0.6% increase in GDP during the first quarter.
If the report indicates a stronger-than-anticipated result, this may lend some support to the Cable. UK Prime Minister Andy Burnham cautioned that the UK economy may experience minimal growth next year if disruptions in the Strait of Hormuz persist thru the end of 2026. Internal modelling from the Treasury indicated that UK GDP might experience growth as low as 0.3% in 2027, according to government sources. Strategists at Scotiabank note that the recent move in GBP is occurring against a relatively quiet fundamental backdrop, with “fundamental releases [having] been limited.” In their view, attention is now firmly turning to the upcoming UK numbers, as they “continue to highlight the importance of Thursday’s data that include the preliminary (2nd) Q2 GDP figures, and monthly trade and industrial production data,” which are expected to provide the next meaningful catalyst for Pound price action.
In the daily chart, GBP/USD exhibits a bullish near-term bias as it remains above the 100-day simple moving average and the 20-period middle SMA of the Bollinger Bands, which reinforces a constructive underlying demand zone just below the current level. The Relative Strength Index (14) at 59.4 indicates a bullish tendency without reaching overbought levels, implying that upside momentum persists as the price nears the upper half of the recent volatility envelope. On the topside, initial resistance is positioned at the upper band of the Bollinger Bands around 1.3570, where attempts to move higher may encounter profit-taking. On the downside, immediate support is observed at the Bollinger middle band near 1.3425, followed by the 100-day SMA at 1.3410. A deeper pullback would target the lower Bollinger band around 1.3280 as a more distant structural floor.
