GBP/USD Price Forecast: Sterling Gains Above 1.35 Amid Dollar Uncertainty

GBP/USD Strengthens as Pound Holds Above 1.35 Despite Dollar Volatility

The GBP/USD pair has been trading with firm momentum, with the pound holding around 1.3520 after briefly touching a session high of 1.3526. Sterling has gained ground for three straight sessions, marking a decisive recovery from earlier lows near 1.3420. At the time of writing, the pair is up 0.19% on the day, reflecting a mix of U.S. macroeconomic resilience and sticky UK inflation data.

U.S. GDP and Labor Market Shifts Shape Dollar Pressure

The U.S. economy grew at an annualized pace of 3.3% in Q2, outpacing the 3.1% forecast and following a -0.5% contraction in Q1. While the GDP data surprised to the upside, labor market signals remain softer. Weekly jobless claims were reported at 229K, slightly lower than the forecast of 230K, yet downward revisions to Nonfarm Payrolls painted a weaker picture, with the economy adding just 35K jobs on average over the past three months compared to 123K in the same period of 2024. The divergence between strong growth and softer employment keeps the U.S. Dollar Index (DXY) on edge, giving space for GBP/USD to reclaim higher ground.

UK Inflationary Pressures Cement Hawkish BoE Stance

UK factory gate inflation surged to 1.9% year-on-year, its highest level in two years, while headline CPI recently climbed to 3.8%, marking an 18-month peak. With price pressures refusing to ease, traders have scaled back bets on additional Bank of England rate cuts in 2025. Current market pricing assigns only a 40% chance of another cut before year-end, a shift reinforced by comments from BoE policymaker Catherine Mann, who emphasized that keeping policy restrictive remains necessary to curb inflation persistence. This repricing has fueled sterling’s 1.5% gain against the dollar so far in August, with GBP/USD now trading comfortably above its 50-day moving average at 1.3494.

Political Uncertainty in the U.S. Adds Dollar Risk

Investor sentiment toward the dollar has also been unsettled by political developments in Washington. President Trump’s push to remove Fed Governor Lisa Cook has intensified concerns over the Federal Reserve’s independence, raising questions about future monetary policy direction. While Jerome Powell remains at the helm, markets see a nearly 89% chance of a September rate cut. Should Fed policy become more directly influenced by the White House, the dollar could face deeper structural weakness, further lifting GBP/USD in the months ahead.

Technical Levels Define Short-Term GBP/USD Path

From a technical perspective, GBP/USD has cleared the 1.3494 barrier and is consolidating above 1.3500. The next upside test lies at 1.3550, followed by the August 14 peak at 1.3594 and the broader 1.3600 resistance zone. On the downside, a close below 1.3500 would re-expose the 100-day moving average at 1.3442, with stronger support sitting at 1.3400. A deeper pullback could bring 1.3360 into play, which aligns with Fibonacci retracement levels. Meanwhile, momentum indicators, including the RSI above 50 on the 4-hour chart, suggest buyers remain in control as long as 1.3490 holds.

GBP/USD Price Forecast: Buy, Sell, or Hold?

With GBP/USD at 1.3520, the pair’s outlook leans bullish given firm UK inflation, reduced BoE cut expectations, and political uncertainty weighing on the dollar. A decisive breakout above 1.3600 could open the path to 1.3785, the year-to-date high, offering attractive upside. On the other hand, a failure to hold above 1.3490 could trigger a correction toward 1.3400. For now, the balance of risks favors a Buy stance on GBP/USD in the near term, with pullbacks toward 1.3450–1.3400 representing accumulation opportunities while the broader trend favors sterling strength into September.

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