GBP/USD is holding above 1.3550. The pair is gaining from renewed risk appetite and a weaker U.S. dollar after softer inflation data boosted expectations for Fed rate cuts. With no major U.S. data on the calendar today, traders are watching Fed speeches for clues.
Here’s What You Need to Know So Far:
1. Dovish Fed expectations are driving the move
July CPI came in slightly cooler than forecast, with annual inflation steady at 2.7% versus expectations of 2.8%. Core CPI rose 0.3% month-on-month, matching estimates. This has strengthened the case for multiple Fed rate cuts this year.
2. Rate cut odds have increased
The CME FedWatch Tool now shows a 95.9% probability that the Fed will cut rates by 25 basis points to a 400–425 bps range at its September 17, 2025 meeting, with only a 4.1% chance of a deeper 50 bps cut. This is up from 91.9% a week ago, reflecting stronger market conviction for a September move. A rate cut would likely add more downward pressure on the USD.
3. Risk sentiment is helping the pound
U.S. and European equity futures are in the green. The FTSE 100 is up about 0.2%. A stronger risk rally later today could keep the USD under pressure and push GBP/USD higher.
4. Technical picture leans bullish but overbought
GBP/USD is near 1.3580, testing the purple trendline and the 1.3590–1.3600 resistance area. This level also lines up with the July highs. If price moves higher, the next targets are 1.3640 and 1.3700. Above that is the year’s high at 1.3769.
On the 4-hour chart as well, RSI is close to 80, showing overbought conditions. Price is still above the 50-day and 200-day moving averages, so the overall trend is up. But overbought readings mean there’s a higher chance of a short pullback or sideways move before another push higher.
Support is at 1.3540, then 1.3500 and 1.3460. If price drops further, 1.3385–1.3377 is the next zone to watch, with the 100-day moving average nearby. As long as price stays above these supports, the short-term bias remains bullish.
5. Short-term outlook favors the upside
Unless the Fed changes its tone or risk sentiment reverses, the bias stays to the upside. But with RSI stretched, traders should be ready for possible pullbacks toward support levels before another push higher.
The Takeaway
GBP/USD is climbing on softer U.S. inflation and growing Fed cut bets. Risk sentiment is providing extra fuel, but overbought signals suggest the rally could pause before testing higher resistance levels.