GBP/USD Price Forecast - GBP To USD Holds 1.3430 as U.S. Jobs Miss and BoE Policy Divergence Shape Outlook

GBP/USD Holds 1.3430 as U.S. Labor Weakness Collides with BoE Hawkish Tilt

The GBP/USD pair trades around 1.3430, largely unchanged on the day, as market attention remains locked on diverging policy paths between the Federal Reserve and the Bank of England. U.S. labor data triggered volatility when August ADP numbers showed only 54,000 jobs added, far below July’s 104,000 and short of forecasts at 65,000. That miss deepened expectations that the Fed will be forced into multiple rate cuts, with CME FedWatch assigning a 95% probability of a September 17th cut and a 53% chance of another in October.

Sterling Gains Support from Bond Market Relief and BoE Signals

Sterling has found breathing space after the recent gilt turmoil eased. Yields on UK 30-year bonds dropped from a 27-year high of 5.75% to 5.58%, calming fears of a fiscal crunch that might have forced the Chancellor into harsher tax hikes and spending cuts. More importantly, BoE Governor Andrew Bailey reiterated that persistent inflation remains a concern, with CPI moving from 2.6% in March to 3.8% in July and possibly near 4% in August, well above the 2% target. This cautious tone reduced the likelihood of another immediate cut from the current 4.00% base rate, reinforcing GBP demand in contrast to a Fed leaning dovish.

U.S. Data Mix Clouds Dollar’s Direction

Beyond ADP, U.S. ISM Services PMI rose to 50.9 in August from 50.1 in July, showing some resilience in the service sector. However, weekly jobless claims and Challenger job cuts highlight fragility in employment. The July trade deficit is expected to widen to $77.7 billion from $60.2 billion, underscoring external imbalances. Dollar flows remain mixed, with the greenback stabilizing after its sharp selloff earlier in the week. This left GBP/USD consolidating rather than breaking decisively higher, even with Fed cuts largely priced.

Technical Outlook for GBP/USD

Cable remains in a narrow channel with support at 1.3350–1.3380, levels tested earlier in the week before buyers reclaimed 1.3400. Resistance emerges at 1.3458 intra-day highs and more significantly at 1.3579, a level that if breached would erase the bearish formation since July. Indicators are turning cautiously bullish: RSI has rebounded toward 50, MACD is near neutral, and price action continues to cling to the 50-day EMA around 1.3460. A sustained push above 1.3460 could open the way toward 1.36, while failure to hold 1.34 risks another slide toward 1.32, a floor last seen in early August.

Seasonality and Fiscal Clouds Temper Sterling Upside

Markets also factor in seasonality, as September often brings weaker performance for GBP/USD, similar to the “red September” effect observed in other assets. UK retail sales due Friday are expected to show contraction, potentially exposing consumer fragility. Fiscal risks remain a cap on upside; losses on UK debt from the BoE’s QE program are estimated at £100 billion, making future bond purchases contentious. These concerns limit Sterling’s ability to fully capitalize on dollar weakness.

Verdict on GBP/USD

With GBP/USD at 1.3430, fundamentals tilt in favor of Sterling in the near term given Fed cut probabilities above 95% and BoE caution against easing. Technicals show resilience above 1.34 but resistance at 1.3460–1.3579 looms. Fiscal pressures and weak UK consumer data could offset gains, but the policy divergence remains supportive. Based on current data, GBP/USD is positioned bullish in the short term, targeting 1.35–1.36, while a break under 1.3350 would shift bias back to bearish.

That's TradingNEWS