GBP/USD steadily climbs above mid-1.3200s amid a softer USD; bulls lack conviction

GBP/USD recovers slightly from over a one-month low as the USD bulls pause for a breather.
The Fed’s hawkish outlook should limit any USD corrective fall and cap gains for spot prices.
Bets for a BoE rate cut in August might undermine the GBP and act as a headwind for the pair.

Haresh Menghani FXStreet

The GBP/USD pair attracts some buyers during the Asian session on Thursday and reverses a part of the previous day's decline to the lowest level since May 13. Spot prices currently trade just above mid-1.3200s, though the fundamental backdrop warrants some caution before positioning for any meaningful recovery.

The US Dollar (USD) enters a bullish consolidation phase following Wednesday's post-FOMC spike to a two-month peak and is seen as a key factor acting as a tailwind for the GBP/USD pair. Any meaningful USD depreciation, however, seems elusive in the wake of the Federal Reserve's (Fed) hawkish tilt. In fact, Fed Chair Jerome Powell, while speaking to reporters during the post-meeting press conference, showed no preference for cutting rates at the next meeting in September.

This, along with he upbeat US macro data released on Wednesday, should act as a tailwind for the USD and cap the GBP/USD pair. Automatic Data Processing reported that private payrolls in the US rose by 104,000 jobs in July, following a revised 23,000 fall recorded in the previous month. Moreover, the Advanced US Gross Domestic Product (GDP) report showed that the economy expanded at a 3.0% annualized pace during the second quarter after contracting by 0.5% in the first quarter.

Adding to this, the uncertainty over the extension of the US-China trade truce could limit deeper losses for the safe-haven buck. The British Pound (GBP), on the other hand, might struggle to lure buyers amid the growing acceptance that the Bank of England (BoE) will cut interest rates by 25 basis points at the upcoming meeting on August 7. This might further contribute to capping the GBP/USD pair and warrants caution before placing aggressive bullish bets or positioning for further gains.

Even from a technical perspective, the overnight breakdown through the 100-day Simple Moving Average (SMA) was seen as a key trigger for bearish traders. Investors now look forward to the release of the US Personal Consumption Expenditure (PCE) Price Index, due later during the North American session. The Fed's preferred inflation gauge will play a key role in influencing the USD price dynamics and produce short-term trading opportunities around the GBP/USD pair.

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

GBP/USD extends the drop to 1.3360

GBP/USD builds on Monday’s decline and briefly clinches five-day lows near 1.3360 on Tuesday. Cable’s extra pullback follows the better tone in the Greenback as uncertainty in the Middle East prompts investors to adopt a cautious stance. Meanwhile, an apathetic UK labour market report also collaborates with the selling pressure on the British Pound.

EUR/USD stays offered just above 1.1400

EUR/USD keeps the downtrend well in place for yet another day, challenging the 1.1400 contention zone on Tuesday. The continuation of the selling impulse in spot comes amid decent gains in the US Dollar, which continues to find support in the persistent effervescence surrounding the US-Iran crisis.

Middle East crisis intensifies, Gold up

Gold now seems to have embarked on a consolidative phase below the key $4,100 mark per troy ounce in the latter part of Tuesday’s session. Meanwhile, uncertainty surrounding the Middle East conflict and rising expectations for a hawkish Fed policy outlook are expected to limit the precious metal’s bullish momentum in the near term.

XRP extends recovery as on-chain activity grows

Ripple (XRP) ticks up and trades around $1.13 at the time of writing on Tuesday. This rebound aligns with a broader recovery in the cryptocurrency market, attributed to reports that mediators between the United States (US) and Iran are seeking a 10-day cessation of strikes to find a way back to the signed Memorandum of Understanding (MoU).

The Iranian war has again risen

The Iranian war has again risen to the top of the economics factor list. There is no end in sight. Intelligence experts say the current level of offense/retaliation will not change minds in Tehran, while in Washington, Trump fears all-out war, which would mean boots on the ground.

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.