The British pound advanced to a three-month high against the dollar on Wednesday, with GBP/USD reaching 1.3613. The move followed the release of UK inflation and labor market data, which largely met expectations but tempered expectations for further Bank of England tightening before year-end.
UK consumer prices rose 2.9% year-on-year in July, up from 2.6% in June and matching forecasts. Core inflation remained unchanged at 2.6%. The figures prompted investors to slightly reduce bets on additional BoE rate hikes in 2024. Labor market data showed unemployment holding steady at 4.9%, above the anticipated level, while the number of payrolled employees declined by 86,000 year-on-year. Regular pay growth held at 3.5%, indicating stable wage pressures.
The pound’s gains were further supported by a softer US dollar, which came under pressure as investors pared back expectations for Federal Reserve tightening. The dollar’s decline followed softer-than-expected US economic data, though elevated oil prices and geopolitical tensions in the Middle East continued to pose inflation risks for the UK.
Technical indicators suggest the pair may consolidate near-term. On the H4 chart, GBP/USD has formed a wide consolidation range around 1.3523, with the market approaching its upper boundary at 1.3631. According to the analysis, a break below this range could open a move toward 1.3500, with the MACD signal line turning downward from above zero.
On the H1 chart, the pair has established a compact range between 1.3588 and 1.3618 around 1.3607. The Stochastic oscillator points to short-term downside pressure, with its signal line trending toward 20. The analysis projects a move lower toward 1.3572 before a potential rebound to 1.3600.
The near-term direction for GBP/USD will depend on upcoming UK economic releases and central bank signals, as well as broader developments in US policy and geopolitical conditions.
