British Pound gathers strength to near 1.3550 as Fed hike bets fade, UK jobs data loom

The GBP/USD pair gains momentum to around 1.3550 during the early Asian trading hours on Tuesday. The US Dollar (USD) softens against the British Pound (GBP) as cooler US inflation data have prompted traders to reduce bets on a US Federal Reserve (Fed) rate hike. The UK employment report will be in the spotlight later on Tuesday.

The weak US Retail Sales, along with softer-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) inflation data last week, have tempered expectations that the US central bank will raise rates at its September 15-16 policy meeting. Traders are now pricing in just a 35% probability of a September hike, alongside a 69% odds of a rate increase by December, according to the CME FedWatch tool. 

Bank of England (BoE) Chief Economist Huw Pill said last week ‌that stronger-than-expected UK economic growth readings reinforced the case for higher borrowing costs to bring inflation back to target.

Financial markets have priced in at least one interest rate increase by the Bank of England (BoE) this year, according to data compiled by LSEG. 

Traders will closely watch the UK jobs and inflation data later this week, which could offer some hints about the BoE interest rate path. The UK Unemployment Rate is projected to fall to 4.8% in June from 4.9% in May. Better-than-expected outcomes could lift the GBP against the USD in the near term. 

Uk data barrage keeps Pound traders on edge

Strategists at Scotiabank highlight a cautious tone in the market, noting that “markets are perhaps a little cautious ahead of this week’s barrage of UK data—wages, jobs, CPI, Retail Sales etc..” They suggest that the upcoming releases are encouraging investors to tread carefully around the Pound, even as it trades near recent highs against the USD.

Technical Analysis: The positive outlook of GBP/USD prevails above the 100-day SMA

In the daily chart, GBP/USD maintains a bullish near-term bias as spot holds above both the 100-day simple moving average (SMA) and the Bollinger middle band. The pair is advancing toward the Bollinger upper band, which caps the topside for now, while the Relative Strength Index (14) around 64 stays in positive territory but shy of overbought, hinting that bullish momentum is constructive yet not overstretched.

On the downside, initial demand is seen at the Bollinger middle band at 1.3440, followed by the 100-day SMA at 1.3420 as a deeper but still supportive layer, with the Bollinger lower band near 1.3275 marking a more distant structural floor. On the topside, a clear break above the Bollinger upper band at 1.3605 would open the door for further gains, while failure to overcome this barrier could trigger consolidation or a corrective pullback toward the clustered support zone in the mid-1.34s.