The GBP/USD exchange rate has extended its recent uptrend, driven by a combination of strong UK economic data and signs of stagflation in the United States. On Monday, the pair was trading at 1.3552, marking a significant recovery from this month’s low of 1.3136.
Market participants are closely watching upcoming UK inflation data and US economic indicators, as these will likely influence the Bank of England’s (BoE) monetary policy decisions and shape the near-term forex market sentiment. Christopher Peterson, broker at AureliusHub, provides a well-rounded exploration of the topic in his article.
UK Inflation Data and Economic Outlook
The British Pound strengthened after the UK Office of National Statistics (ONS) released its latest jobs and GDP reports. The data revealed that payrolls declined for the sixth consecutive month, while vacancies remained in a downtrend, indicating a slowing labour market.
Despite the decline in hiring, wage growth continued, raising concerns that inflation could remain sticky for a prolonged period. This combination of subdued employment growth and rising wages presents a classic stagflation scenario, posing challenges for monetary policy.
The UK GDP report also surpassed expectations, with the economy expanding by 0.3% in Q2, above the median estimate of 0.2%, though still below Q1’s growth of 0.7%. This demonstrates that while the economy is still expanding, the pace remains moderate, reinforcing the mixed macroeconomic picture.
The next key release is the UK consumer inflation data, expected on Wednesday. Economists forecast that headline CPI will rise from 3.6% in June to 3.7% in July, while core CPI may climb to 3.8%.
These figures will provide critical insights into the BoE’s interest rate strategy, as persistent inflation amid a weakening labour market could force the central bank to balance growth and price stability.
US Inflation and Its Impact on GBP/USD
Meanwhile, the US dollar has been under pressure following the release of US consumer inflation data. The report showed that the headline CPI remained steady at 2.7%, while the core CPI increased from 2.8% to 3.1%.
The combination of persistent US inflation and slowing economic growth has led to market speculation that the Federal Reserve may adopt a more cautious approach to rate hikes, further supporting the GBP/USD bullish momentum.
GBP/USD Technical Analysis
From a technical perspective, the 12-hour chart of GBP/USD shows that the pair recently bottomed at 1.3135, forming a double-bottom pattern—a classic reversal signal suggesting potential further gains. The pair has now crossed above both the 50-period and 100-period moving averages, which have formed a bullish crossover, reinforcing the uptrend.
The MACD has crossed above the zero line, signaling strong bullish momentum, while the Relative Strength Index (RSI) has risen past 50, reflecting growing upward pressure. Combined, these technical indicators point to the GBP/USD pair being poised for additional gains in the short term.
Key Levels to Watch
For traders, the next resistance level is located at 1.3787, which represents the high from July 1. A sustained break above this level could open the door to further upside potential, with the next key target being 1.3800.
Conversely, a move below the 50-period moving average at 1.3450 would invalidate the bullish scenario, signaling potential consolidation or a trend reversal.
Trading Implications
The recent GBP/USD rally highlights the importance of monitoring both fundamental and technical factors. On the fundamental side, UK GDP growth, wage trends, and consumer inflation data are likely to influence the BoE’s policy decisions, while US inflation data and economic growth metrics continue to impact dollar sentiment.
On the technical side, the formation of a double-bottom pattern, coupled with a bullish MA crossover and positive momentum indicators, reinforces the uptrend narrative.
Traders should be cautious of potential volatility around key economic releases, especially the upcoming UK CPI data. Any surprises in the headline or core inflation figures could trigger sharp movements, testing support and resistance levels. Moreover, the interplay between BoE and Fed policy expectations will remain a critical driver of GBP/USD price action.
Conclusion
In summary, the GBP/USD forex signal points to continued upside potential amid a backdrop of strong UK GDP growth, persistent wage-driven inflation, and US stagflation concerns. Technical indicators, including the double-bottom pattern, moving average crossovers, and momentum oscillators, suggest that bulls are in control.
Key levels to monitor are 1.3787 for resistance and 1.3450 for support, as these will likely dictate the next phase of the GBP/USD trend. Traders should stay alert to economic releases, as the combination of fundamentals and technical analysis will determine whether the pair can sustain its upward trajectory toward 1.3800 and beyond.
