The GBP/USD pair has entered a critical phase in the forex market, with traders closely monitoring both fundamental and technical signals. After climbing to last week’s high of 1.3595, the pair retreated slightly to the psychological support level of 1.3500, setting the stage for heightened volatility in the coming sessions. 

The focus now shifts to upcoming UK inflation data, retail sales figures, and the Jackson Hole Symposium, which are expected to provide significant catalysts for the currency pair. In this article, broker Thomas Mader from Highmont Group breaks down the topic with clarity and detail.

UK Consumer Price Index Data in Focus

The most immediate driver for the British pound (GBP) will be the release of the UK Consumer Price Index (CPI) by the Office of National Statistics (ONS). Market expectations point to headline inflation ticking higher, with forecasts suggesting a rise from 3.6% in June to 3.7% in July.

At the same time, the core CPI, which strips out the more volatile categories of food and energy, is projected to remain steady at 3.7%. The stability of the core print, alongside a slight rise in headline inflation, will likely reinforce the view that the UK is stuck in a form of stagflation, a condition marked by elevated inflation coupled with sluggish economic growth.

The ONS will also release UK retail sales data, another key metric for assessing the health of consumer demand. A weaker retail performance could intensify stagflation concerns, whereas stronger figures might provide some support for the pound.

Bank of England Rate Expectations

The inflation print and retail sales numbers will be critical in shaping Bank of England (BoE) policy expectations. Until recently, many investors had positioned for a potential rate cut before year-end. However, the persistence of above-target inflation has changed the narrative.

Money markets and institutional investors now broadly anticipate that the BoE will keep its Bank Rate unchanged at 4% for the remainder of the year. This represents a significant shift in outlook, as the likelihood of a cut has diminished. The repricing of rate expectations has pushed UK government bond yields higher.

• The 10-year gilt yield climbed to 4.73%, the highest level since May.
• The 2-year gilt yield rose to 3.97%, reflecting higher short-term rate expectations.

Elevated yields tend to support the pound, as they enhance the currency’s attractiveness relative to lower-yielding alternatives.

US Economic Data and Federal Reserve Commentary

On the US side, the market will be listening closely to Federal Reserve commentary. Upcoming remarks by Michele Bowman, a senior Fed official, are especially significant. Bowman, like Governor Christopher Waller, has previously supported the case for cutting interest rates. 

If her tone remains dovish, it could weaken the US dollar (USD) and give the GBP/USD pair additional upward momentum.

Beyond this data, the key macro event on the horizon is the Jackson Hole Symposium. This annual gathering of central bankers, economists, and policymakers often shapes investor sentiment for months ahead. 

Market participants will be waiting for Federal Reserve Chair Jerome Powell’s speech, which is expected to provide clarity on the Fed’s policy trajectory. A hawkish Powell could boost the USD, while a dovish message may provide fuel for a GBP/USD rebound.

GBP/USD Technical Analysis

From a technical analysis perspective, the GBP/USD chart signals the potential for further upside.

• The daily chart highlights a strong rebound from 1.3136, a level tested earlier this month, to the current 1.3500 zone.
• The pair recently broke above the critical resistance level at 1.3425, which had marked its highest point since September of last year.
• The 25-day and 50-day Exponential Moving Averages (EMA) have crossed, typically a bullish signal indicating a potential continuation of the uptrend.
• Additionally, the pair has formed an inverse head-and-shoulders pattern, a well-known bullish reversal structure that often precedes further gains.

Momentum indicators also reinforce this bullish outlook. The Awesome Oscillator (AO) has climbed above the zero line, reaching its strongest level since early July. This momentum suggests that the bulls remain in control, with the next logical target being the resistance zone around 1.3600.

If this level is breached convincingly, traders may look toward 1.3700, another round number that could act as a magnet for price action. On the downside, immediate support lies at 1.3425, with further support at 1.3300. A break below these levels could signal renewed weakness.

Conclusion

The GBP/USD forex signal currently points to a potential rebound, with bulls eyeing 1.3600 resistance as the next major hurdle. Strong UK data and continued BoE policy firmness could reinforce the rally, while dovish Fed commentary would provide an additional tailwind.