GBP/USD holds near highs: Focus turns to key events later this week

GBP/USD is holding at 1.3627 on Tuesday. In the final full week of August, the pair remains near its highest level since mid-February. Sterling is being supported by dollar weakness following the US Treasury’s unexpected decision to at least double its purchases of long-term government bonds.

Investors are also awaiting details of new sanctions against Iran. The highlight of the week will be Fed Chair Kevin Warsh’s speech at Jackson Hole on Friday, which could shape expectations for the future trajectory of US interest rates.

In the UK, money markets continue to price in one Bank of England rate hike before year-end and a further 25-basis-point move by early 2027. July inflation accelerated to 2.9% – the highest since March – while core inflation came in above expectations at 2.6%.

Further support for the pound is coming from strong domestic data: PMIs point to a pick-up in business activity, while consumer confidence climbed to a two-year high in August. At the same time, high inflation remains the key risk, potentially fuelled by a protracted conflict with Iran and elevated energy prices.

Technical analysis

On the H4 GBP/USD chart, the market has nearly reached the local upside target at 1.3672 and is forming a narrow consolidation range below this level, currently extending between 1.3619 and 1.3650. A new compact consolidation range is expected to form below 1.3672. A downside breakout would open the way for a move lower towards 1.3550. The MACD indicator supports this scenario, with its signal line above zero and beginning to turn downwards.

On the H1 chart, the market has formed a compact consolidation range around the 1.3640 level, currently extending between 1.3618 and 1.3650. A move lower towards 1.3600 is expected, and a break below this level would open the way for a further decline to 1.3550. The Stochastic oscillator confirms this scenario, with its signal line below 50 and trending downward towards 20, indicating short-term downside pressure.

Conclusion

GBP/USD remains near multi-month highs, supported by dollar weakness following the US Treasury’s bond buyback announcement and strong UK economic data. Markets are now focused on upcoming catalysts, including details of new sanctions against Iran and Fed Chair Warsh’s Jackson Hole speech on Friday, which could shape expectations for US interest rates. In the UK, money markets continue to price in further BoE tightening, supported by accelerating inflation and improving business activity and consumer confidence data. However, high inflation and geopolitical risks remain key concerns. Technically, the pair may see a short-term pullback towards 1.3600, with a break below this level opening the way towards 1.3550. The near-term direction will depend on central bank signals and geopolitical developments.