Macro Backdrop: Inflation and Employment Data Fuel Sterling’s Rally
June’s Consumer Price Index in the UK climbed to 3.6% year-on-year, beating both forecasts and May’s 3.4%. On a monthly basis, inflation ticked up to 0.3% from 0.2%. Despite the Bank of England’s persistent efforts to contain price growth with a peak rate of 4.25%, the inflationary trend remains stubborn, making further hawkish rhetoric from policymakers highly probable.
Labor market dynamics further reinforce the bullish scenario: three-month employment rose by 134,000 in May, shattering consensus estimates of 46,000 and exceeding the previous print of 89,000. However, the number of unemployment benefit claims in June jumped by 25,900 versus expectations of 17,900, and the unemployment rate crept up to 4.7% from 4.6%. Markets, however, largely shrugged off these figures, allowing the pound’s uptrend to persist.
US Dollar Weakness: Political Uncertainty and Tariff Concerns Weigh on Greenback
The US dollar continues to hover near its yearly lows, with the USDX edging towards 95.97 amid investor frustration over President Trump’s foreign trade policy and the imminent introduction of new import tariffs on August 1. While European officials point to progress in trade negotiations with the US — notably, talks on 15% export tariffs — no agreement has been finalized. Meanwhile, negotiations between Washington and Beijing are reportedly entering a decisive stage, but a breakthrough remains elusive.
Support and Resistance Levels
- Support: 1.3400, 1.3170, 1.3000
- Resistance: 1.3620, 1.3760, 1.3962
Technical Setup: Scenarios for GBP/USD
The long-term trend remains bullish. The pair rebounded from 1.3400 in July and is now targeting 1.3620. A sustained break above this area could open the path towards 1.3760, while renewed weakness towards 1.3400 could offer fresh long entry opportunities targeting 1.3620.
In the medium term, the pair’s correction to the 1.3436–1.3401 support range attracted significant buying volume, fueling the latest upswing. With prices now holding above 1.3577, a continuation to the July high of 1.3788 looks plausible.
Trading Strategies:
- Buy Limit: Entry at 1.3400, target 1.3620, stop loss at 1.3330. Time horizon: 9–12 days.
- Sell Stop: Entry at 1.3330, target 1.3170, stop loss at 1.3410.
GBP/USD holds above support: technical outlook