Pound Idle as Dollar Wobbles and UK Fiscal Fog Deepens

GBPUSD clings to the upper end of its range near 1.3450–1.3500, buoyed by broad US dollar weakness but weighed down by deteriorating UK macro fundamentals. The greenback’s 11% year-to-date slide—driven by Fed rate cut expectations and tariff-related uncertainty—has kept cable elevated, even as UK-specific pressures mount.

Sterling’s resilience masks growing vulnerabilities. UK inflation surged to 3.6% in June while labor market data cooled, nudging markets toward a 25 bp BoE cut in August and potentially 50 bp by year-end. Fiscal concerns add to the drag, with ballooning deficits and politically fraught welfare reforms dampening sentiment.

For fresh direction, traders should monitor tariff developments, UK inflation prints, and BoE rhetoric in the lead-up to the August 7 policy decision.

1. Dollar Softness & Tariff Tailwinds

The US dollar remains near multi-year lows—down ~11% YTD—as markets price in Fed rate cuts and tariff-related uncertainty. GBPUSD has stayed elevated around 1.3450–1.3500, supported by this dollar weakness.

2. UK Economic & Fiscal Pressure

Sterling trades near multi-week lows (~$1.3452), combining cooling labor data and surging inflation (June CPI 3.6%). With markets pricing a 25 bp BoE cut in August and ~50 bp by year-end, fiscal risks (deficit, welfare reforms) are casting shadows over GBP.

3. Technical Structure & Positioning

Cable is range-bound between 1.3400 and 1.3500. Key support sits at 1.3425, with resistance at 1.3500–1.3525. A sustained break below 1.3425 could target 1.3350, while a rebound above 1.3525 may aim for 1.3600.

Summary:

GBPUSD remains choppy amid conflicting drivers: USD declines support cable, but UK data/fiscal instability and BoE easing expectations cap gains. Watch tariff headlines, UK inflation data, and BoE commentary ahead of the August 7 meeting for the next directional trigger.

GBPUSD – H2 Timeframe

On this GBPUSD 2-hour chart:

Price broke structure to the upside after a bullish reaction from the ascending trendline and the 50-period moving average (orange line), confirming a short-term shift in momentum.

A clear demand zone formed around 1.3400–1.3415 (highlighted box), where buyers aggressively stepped in, leading to the impulse move and break of the previous high (black arrow).

That previous high has now become a new support zone, aligning closely with the trendline and the moving average — forming a confluence area.

My Trading Plan:

I’ll wait for price to retrace into the boxed demand zone at the intersection of:

• The ascending trendline
• The 50-period MA
• The former breakout structure

If I spot bullish confirmation (e.g., bullish engulfing or rejection wick), I’ll consider long entries, targeting a retest and potential breakout of the recent high near 1.3510–1.3530.

Invalidation: If price breaks and closes decisively below the demand zone and trendline, I’ll cancel the bullish bias and watch for reversal signals or deeper pullbacks.

Direction: Bullish

Target- 1.35242

Invalidation- 1.33920

CONCLUSION

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