The GBP/USD currency pair is trading with a cautious tone as investors await Federal Reserve Chair Jerome Powell’s remarks at the Jackson Hole Symposium. Market participants are carefully assessing the balance between US economic resilience and signs of labor market softening, while also monitoring UK consumer confidence data.
The pair managed to hold above the 1.3400 level, despite pressure from a broadly stronger US Dollar (USD). In their piece, Matthias Trapp, a broker at ProDivia Group, expertly dissects the issue.
Market Overview: GBP/USD Holds Steady After Recent Losses
During Friday’s Asian session, GBP/USD traded near 1.3410, consolidating after four consecutive sessions of losses. The downside momentum eased as investors shifted into a wait-and-see mode ahead of Powell’s highly anticipated speech, which may provide clearer direction on the Federal Reserve’s September policy outlook.
The US Dollar Index (DXY) firmed following upbeat PMI data, while risk sentiment stayed subdued, capping GBP/USD’s ability to stage a stronger rebound. Market participants appear reluctant to take fresh positions until Powell’s comments clarify whether the Fed leans toward maintaining rates or considering a rate cut in September.
US Economic Data: PMI Strength, Labor Market Softness
The preliminary S&P Global US Composite PMI rose to 55.4 in August, up from 55.1 previously, marking continued expansion across the economy. Within the release, the US Manufacturing PMI surprised to the upside, improving to 53.3 compared with 49.8 previously and beating the consensus forecast of 49.5. The Services PMI, while easing slightly to 55.4 from 55.7, remained stronger than the expected 54.2, signaling resilient business activity.
At the same time, US Initial Jobless Claims climbed to 235,000 for the week, the highest in eight weeks, surpassing the market consensus of 225,000. This development underscores emerging cracks in the US labor market, complicating the Federal Reserve’s decision-making process.
The combination of robust business activity alongside rising unemployment claims highlights the Fed’s delicate challenge: addressing persistent inflation pressures while acknowledging potential economic fragility.
Fed Policy Outlook: Mixed Signals Ahead of Powell
The CME FedWatch Tool shows traders are pricing in a 74% chance of a September rate cut, down from 82% earlier in the week. The change highlights uncertainty over whether Powell will stress inflation concerns or place greater weight on labor market softness.
On Thursday, Chicago Fed President Austan Goolsbee stated that the September meeting remains open for action, noting the mixed economic signals. Meanwhile, the Boston Fed President Susan Collins expressed openness to a rate cut as soon as September, pointing to tariff headwinds, global uncertainty, and labor market moderation, even as inflation risks linger.
Powell’s speech at Jackson Hole is expected to be pivotal in shaping near-term market expectations. A hawkish stance could push the US Dollar higher and pressure GBP/USD, while a dovish tilt may support a rebound in the pair.
UK Economic Developments: Consumer Confidence Improves
On the UK side, the GfK Consumer Confidence Index rose to -17 in August, an improvement from -19 in July, marking its strongest reading in over a year. This boost was partly attributed to the Bank of England’s (BoE) recent rate cut, which has eased borrowing costs and offered temporary relief to households.
However, sentiment remains fragile. Sticky inflation, concerns over rising unemployment, and the prospect of tax hikes continue to weigh on household finances. The improvement in consumer sentiment, though notable, may not translate into sustained economic momentum without stronger labor market conditions and wage growth.
Technical Outlook: GBP/USD Range-Bound Above 1.3400
From a technical analysis perspective, GBP/USD remains supported near 1.3400, a key psychological and chart-based level. Failure to hold this zone could open the door to further downside, with support levels near 1.3350 and 1.3300 coming into focus.
On the upside, immediate resistance lies around 1.3450–1.3470, followed by the 1.3500 round figure. A decisive break above 1.3500 could signal renewed bullish momentum, but much will depend on Powell’s message and subsequent US Dollar reaction.
Conclusion: Awaiting Clarity from Jackson Hole
The GBP/USD pair has managed to stabilize above the 1.3400 mark despite headwinds from a stronger US Dollar. The recent US PMI data reinforced economic resilience, but the rise in jobless claims reminded markets of growing labor market vulnerabilities.
At the same time, UK consumer confidence improved but remains constrained by inflationary and fiscal concerns.
As traders brace for Powell’s speech, the market narrative remains one of uncertainty and balance. A clear hawkish message could push GBP/USD lower, while a dovish outlook might provide a lifeline for the pair. Until then, the 1.3400 support level remains the critical line in the sand for GBP/USD.
