Pound Strengthens on Hot UK Inflation, Extending Gains Against US Dollar

Pound Sterling (GBP) edged higher on Thursday in the North American session, rising 0.25% despite a softer-than-expected U.S. payrolls report for July. The GBP/USD pair traded at 1.3639, having hit an intraday peak of 1.3659—its highest level since February.

GBP/USD Rises as UK Inflation Data Offsets Firm U.S. Labor Market

The U.S. Dollar Index (DXY), which measures the greenback’s strength against a basket of six major currencies, remained relatively unchanged at 98.79 after dipping to two-and-a-half-month lows near 98.55 earlier in the week—a level last seen on May 14.

U.S. Initial Jobless Claims for the week ending August 15 declined to 206K, below the anticipated 210K, while the 4-week moving average of jobless claims rose slightly from 199.75K to 204K.

Federal Reserve officials continued to shape monetary policy expectations. St. Louis Fed President Alberto Musalem noted that strong economic growth and investment flows are affecting bond markets. He revealed he advocated for a rate hike in July but expressed openness regarding action at the upcoming September meeting.

San Francisco Fed Mary Daly weighed in earlier, suggesting that rising long-term yields reflect global pressures rather than domestic policy missteps. She also emphasized confidence in Fed credibility, noting that short-term rate adjustments remain responsive to incoming data.

In the UK, July inflation surprised to the upside, reaching a four-month high as confirmed by official data released Wednesday. Traders continue to price in a 25-basis-point interest rate increase by the Bank of England by its December meeting, according to Prime Terminal.

Looming on the economic calendar are U.K. Retail Sales figures for July, expected to reflect a slowdown in consumer spending. Meanwhile, investors will monitor S&P Global Flash PMIs across both sides of the Atlantic amid a light week for macroeconomic releases.

GBP/USD Price Forecast: Technical Outlook

On the daily timeframe, GBP/USD hovered around 1.3636, maintaining a bullish near-term bias while holding above key support zones. These include the cluster of broken descending trendlines now acting as floors near 1.3499–1.3409, as well as the convergence of the 50-, 100-, and 200-day simple moving averages (SMAs) around 1.3390.

Rising trendline support, marked by pivot points at 1.3609 and 1.3366, further supports the positive setup. The Relative Strength Index (14) hovered at 70.49—edging into overbought territory—suggesting strong upward momentum but signaling potential vulnerability to near-term consolidation.

To the downside, immediate support lies near recent highs around 1.3609, followed by former trendline resistance-turned-support at 1.3499 and 1.3409, then the SMA cluster near 1.3390. A deeper decline could find footing at the lower rising trendline break near 1.3366. Absent defined resistance above current levels, any overbought retracement may precede renewed upside pressure—as long as key supports hold firm, the path of least resistance stays tilted northward.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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