GBP/USD Price Targets 1.3500 as Pound Rallies on Hawkish BoE Cut and US Weakness
Sterling strengthens across major pairs after BoE signals slow easing and US data pressures the dollar, with bulls eyeing a breakout above 1.3500 | That's TradingNEWS
GBP/USD Surges as BoE Delivers Hawkish Cut and US Dollar Weakens
The GBP/USD has broken decisively higher, climbing toward the 1.3450 region after a complex mix of monetary policy signals, labor market data, and shifting expectations for central bank action on both sides of the Atlantic. The move was sparked by the Bank of England’s 5–4 vote to cut interest rates by 25 bps to 4%, a narrower decision than markets anticipated, which traders interpreted as a “hawkish cut” given the bank’s emphasis on a gradual easing path. The reaction was immediate — the pound rallied above 1.3400, reaching an intraday high near 1.3436, before settling closer to 1.3410. The market also absorbed fresh US data showing initial jobless claims at 228K, the highest since 2021, and continuing claims at 1.97 million, underscoring cracks in the labor market that weakened the dollar’s bid.
Narrow BoE Vote Reduces Odds of Aggressive Cuts
A crucial driver of the GBP/USD rally was the unexpectedly tight vote split within the BoE’s Monetary Policy Committee. While a rate cut was broadly priced in, four members voted to hold rates, and one called for a 50 bps reduction. This narrow margin signaled resistance to aggressive easing amid lingering inflation risks. The statement reinforced this cautious tone, noting that while policy restrictiveness had eased slightly, further cuts would proceed at a measured pace. This stance, paired with solid wage growth data in the UK — easing only slightly from 5% to 4.6% — suggests the BoE is unwilling to move too quickly toward looser conditions, limiting downside for the pound.
US Data Weakness and Fed Rate Cut Bets
Across the Atlantic, US inflation and labor market reports have tilted market expectations toward faster Fed easing. July CPI held at 2.7% y/y versus the 2.8% forecast, while core CPI ticked up to 3.1% from 2.9%. Despite the hotter core figure, markets are now pricing in up to 75 bps of Fed cuts by year-end, with September seen as the starting point. Jobless claims data amplified the dovish Fed narrative, weakening the US Dollar Index (DXY) to 98.34 before a mild rebound on speculation that Christopher Waller could be the next Fed Chair — a potential hawk-to-dove shift given the Trump administration’s preference for faster rate cuts.
Technical Outlook: Bulls Eye 1.3500 Breakout
The technical setup for GBP/USD has turned bullish after reclaiming the 50-day EMA at 1.3425 and holding gains above 1.3400. Key resistance lies at the 1.3500 psychological level and the 50-day SMA; a breakout could open the path toward 1.3570–1.3600. On the downside, a daily close below 1.3400 risks a pullback toward the 100-day SMA at 1.3351, with further losses exposing 1.3300. Momentum remains supported by five consecutive sessions of higher or flat closes, indicating strong underlying bid tone.
Cross-Market GBP Strength
The pound’s move against the dollar was mirrored across other major pairs. Sterling rose 0.67% against the euro, 0.51% versus the yen, and 0.64% against the Swiss franc. This broad-based strength suggests that the rally is not solely a function of dollar weakness but also reflects fundamental pound demand, bolstered by steady UK labor market data and reduced expectations for aggressive BoE easing.
UK Growth Risks Still Loom
While the pound’s near-term technicals are constructive, risks remain. UK Q2 GDP, due later this week, is expected to slow sharply to 0.1% from 0.7% in Q1. A downside surprise could rekindle BoE cut speculation and temper the bullish trend in GBP/USD. Additionally, fiscal policy pressures are mounting, with Chancellor Rachel Reeves expected to outline tax hikes to shore up public finances — a move that could weigh on consumer sentiment and cap sterling gains.
Verdict: Short-Term Bullish Bias for GBP/USD
Given the combination of a hawkish BoE cut, resilient UK labor data, and softening US economic indicators, the GBP/USD setup leans bullish in the near term. Momentum targets 1.3500 as the next breakout point, with 1.3570–1.3600 in sight if upside pressure persists. However, the trade remains sensitive to incoming UK GDP data and evolving Fed rate cut expectations. Based on current conditions, bias is for a Buy stance while above 1.3400, with stops tightened if price closes back below the 100-day SMA.
