GBP/USD strengthens to approximately 1.3645 in the early Asian session on Friday. A disappointing US jobs report and softer inflation data have tempered expectations for a more stringent monetary policy from the Federal Reserve. The Bank of England is anticipated to maintain interest rates for the rest of the year. The GBP/USD pair exhibits resilience around 1.3645 in the early hours of trading on Friday in the Asian market. The US Dollar softens against the British Pound amid fading Federal Reserve rate hike expectations. Traders prepare for the release of the UK Retail Sales data for July, scheduled for publication later on Friday. Softer US economic data and uncertainty regarding Federal Reserve policy are applying some downward pressure on the US dollar. Charu Chanana stated that elevated Treasury yields do not inherently support the USD if investors perceive the rise as indicative of fiscal risk, increased government borrowing, or ongoing inflation, rather than as a sign of robust US growth or a more stringent monetary policy. Markets are reflecting a 64% probability that the US central bank will maintain current interest rates in September, alongside a 36% likelihood of an increase, as indicated by the CME FedWatch Tool.
The Bank of England is expected to maintain interest rates at 3.75% for the remainder of the year, as indicated by economists. Traders are anticipating the release of the UK July Retail Sales data to gain further insights into the trajectory of the UK interest rate outlook. Economists anticipate a 0.5% month-over-month decline in Retail Sales for July, a decrease from the 1.0% observed in June. In the event of a weaker-than-anticipated result, this may exert downward pressure on the Cable in the short term. Analysts note that the latest inflation release, when viewed alongside “yesterday’s weak labour market data,” has helped cool expectations for further tightening. They highlight that the combination of softer price dynamics and labour market signals “has taken the top off BoE pricing for the remainder of the year.” Fed’s Musalem delivered a speech broadly in line with the established baseline, with the FXS Speechtracker score at 7/10 matching the historical average and signalling a familiar mix of concern and caution.
The emphasis on robust growth, supportive financial conditions, persistent inflation hovering around 2.5%-3%, and the idea that “hiking rates now could save more aggressive action later” lends a slightly hawkish tone, even as Musalem underscores the importance of Fed credibility and its independence from fiscal policy. References to elevated input costs, the potential for a Super El Nino supply disruption, and the perspective that the prevailing policy stance is either neutral or supportive highlight a tendency toward a more restrictive policy should inflation not align with the 2% target, all while refraining from providing clear direction prior to the September FOMC meeting. The FXS Fed Sentiment Index decreased by 0.34 points to 132.42, suggesting a minor retreat in hawkishness compared to the previous reading while still maintaining a solid position above the 100 neutral threshold. This configuration suggests the Fed is still perceived as operating in hawkish territory despite the marginal softening, consistent with a speech that acknowledges accommodative conditions yet frames pre-emptive tightening as a live option, as captured by the FXS Speechtracker.
In the daily chart, GBP/USD exhibits a bullish near-term bias as the spot remains above both the 100-day simple moving average and the Bollinger 20-period middle band. Price is approaching the upper Bollinger band, indicating a significant topside extension, while the Relative Strength Index (14) at approximately 71 enters overbought territory, implying that upside momentum is strong yet becoming more susceptible to a corrective pause. On the topside, immediate resistance is situated at the Bollinger upper band at 1.3665. A sustained break above this level would pave the way for additional gains in the broader upward movement. On the downside, initial support emerges from the Bollinger middle band cluster around 1.3485, followed by the 100-day SMA at 1.3432, with deeper demand seen near the lower Bollinger band at 1.3300. A pullback toward this layered support zone would likely be viewed as a dip-buying opportunity, provided the price remains above the 100-day average.
