GBP/USD begins the week of 10–14 August positioned around 1.3500, marking its peak since 15 July. Sterling is capitalising on the momentum generated by a significant drop in the dollar, triggered by a disappointing US labour market report that has diminished expectations for a Federal Reserve rate increase in September. Further support has emerged from the decline in oil prices: more affordable energy is alleviating inflationary pressures and lessening the strain on the UK economy. Geopolitics continues to be a significant determinant. Donald Trump has indicated advancements in discussions between Iran and Oman concerning the Strait of Hormuz, tho a conclusive agreement remains elusive. A further decline in oil prices would bolster expectations that the Bank of England can sustain a gradual approach to monetary policy. At its last meeting, the regulator opted to maintain the current rates, with Andrew Bailey affirming that the disinflation process is ongoing.
The primary focus for sterling this week will be the preliminary GDP estimate for the second quarter, scheduled for release on Thursday. The economy is anticipated to expand by 0.2% on a quarter-on-quarter basis, a decline from the previous rate of 0.6%, while the annual growth rate is forecasted at 1.6%, compared to 0.9% previously. June GDP is projected to increase by 0.1%. Stronger-than-anticipated data would bolster GBP/USD, whereas a significant deceleration could exert renewed pressure on the pound. On the US side, the pivotal release will be July inflation data on Wednesday, with core CPI anticipated at 2.5% year-on-year and headline CPI at 3.4%. Thursday presents the Producer Price Index, succeeded by retail sales data and the preliminary consumer sentiment index from the University of Michigan on Friday. Weak inflation and consumer figures may exert downward pressure on the dollar, potentially facilitating additional gains for GBP/USD. Conversely, persistent price pressures would bolster the argument for Federal Reserve tightening.
On the H4 GBP/USD chart, a broad consolidation range is emerging around the 1.3470 level. An upside breakout would pave the way for a progression toward 1.3522 and subsequently 1.3535. A downside breakout would indicate a potential movement toward 1.3436, and a breach beneath this level would facilitate the trend’s extension to 1.3190. The MACD indicator corroborates this scenario, as its signal line remains above zero while exhibiting a downward trajectory. On the H1 chart, the market has established a tight consolidation range centred around the 1.3470 level, presently fluctuating between 1.3434 and 1.3500. A decline toward 1.3470 is anticipated, succeeded by an ascent to 1.3535. The Stochastic oscillator corroborates this scenario, as its signal line resides beneath 50 and is directed downwards. In the near term, a decrease to 20 is anticipated, succeeded by an increase to 80.
GBP/USD has commenced the week robustly, trading close to its peak level since mid-July. The pound has gained from a depreciating dollar, influenced by subdued US labour market statistics and declining oil prices. These factors have alleviated inflation worries and diminished anticipations of stringent Federal Reserve measures. Geopolitical developments concerning the Strait of Hormuz have bolstered risk sentiment. Attention will now turn to the UK GDP data scheduled for Thursday and the US inflation figures set for Wednesday, as both are expected to offer significant insights into the policy trajectories of the Bank of England and the Federal Reserve. Technically, the pair seems positioned for additional upward movement toward 1.3535, with immediate direction dependent on the key data releases scheduled for this week. A break below 1.3436 would alter the outlook to bearish, revealing the 1.3190 level.