The GBP/USD currency pair strengthened above the 1.3600 level, trading around 1.3610 during early European hours on Thursday, as the US Dollar weakened against the British Pound. This move was driven by fading expectations for further Federal Reserve rate hikes and ongoing Treasury bond buybacks, with the US Initial Jobless Claims report still to be released later in the day [1].
Recent US economic data, including a disappointing jobs report and softer inflation figures, have reduced market bets on tighter Fed monetary policy. According to the CME FedWatch Tool, the probability of a US rate hike in September has dropped to 32.7%, down from 47% a month earlier. The Federal Reserve's July meeting minutes indicated that many policymakers would consider further hikes if inflation does not decline, but the Fed kept the Federal Funds Rate in a range of 3.5%-3.75% last month [1].
In the UK, the Bank of England is likely reassured by the lack of surprises in the latest Consumer Price Index inflation data, while recent labour market figures showed a slightly cooler environment. Money market pricing suggests that City economists expect one BoE rate hike by year-end, which would raise the Bank rate from 3.75% to 4.0%. Analysts at MUFG highlighted that while headline wage growth was slightly stronger, underlying pay pressures moderated, with private sector ex-bonus earnings growth slowing from 2.9% to 2.8%. PAYE employment fell by 13,000, reinforcing the view of easing inflation risks from the UK labour market [1].
Technically, GBP/USD maintains a bullish near-term outlook, trading above both the 20-period Bollinger middle band and the 100-day simple moving average. The Relative Strength Index stands at 68.7, indicating strong but stretched upside momentum. Key resistance is seen at the 1.3645 Bollinger upper band, with a break above potentially targeting the 1.3700 psychological level. Initial support lies at the August 18 low of 1.3519, with further support at the 100-day SMA near 1.3425 [1].
CONCLUSION
GBP/USD's advance above 1.3600 reflects a combination of softer US economic data, reduced Fed rate hike expectations, and easing UK inflation risks. Technical indicators suggest the pair retains a bullish bias, though momentum appears stretched. Market participants are now watching for further US data and potential BoE policy moves for direction.