GBP/USD Price Forecast – Sterling Holds 1.3440 as Dollar Weakens on US Jobs Data

GBP/USD Surges Toward 1.3440 as Sterling Benefits from Strong UK Data and US Weakness

UK Macro Support Lifts GBP/USD (GBPUSD=X) From Lows

The GBP/USD (GBPUSD=X) pair bounced sharply from 1.3332 to 1.3442 after the UK Services PMI surged to 54.2 in August, its strongest reading since April 2024, beating July’s 51.8 and easing investor concerns over the government’s fiscal stability. Sterling’s rally coincided with a retreat in the US Dollar after the JOLTS job openings data revealed a sharper-than-expected fall to 7.181 million from 7.437 million in June. This labor market weakness amplified recession fears as tariffs weighed on hiring, while US factory orders contracted 1.3% month-on-month, marking the sixth consecutive monthly decline in manufacturing activity.

Bond Yields and Fiscal Concerns Shape Sterling’s Path

The rebound in GBP/USD came against a backdrop of surging UK gilt yields. Thirty-year yields briefly hit 5.695%, the highest in a quarter-century, underscoring growing investor anxiety over debt sustainability. Elevated yields raise borrowing costs, but the PMI data provided a counterweight by signaling resilient private-sector demand. The Bank of England remained cautious, with Governor Bailey emphasizing anchored inflation expectations while warning of downside job risks. BoE Governor Taylor stressed the need to keep policy restrictive until inflation sustainably returns to 2%, highlighting that the easing cycle may proceed more slowly than markets expect.

US Dollar Index and Fed Rate Cut Expectations

The US Dollar Index (DXY) hovered around 98.40, with safe-haven demand keeping it supported even as rate cut odds surged. Markets now price a 91% probability of a 25-basis-point Fed cut in September, up from 85% the prior week, with August Nonfarm Payrolls expected to deliver just 75,000 jobs and unemployment projected at 4.3%. If realized, this would add to pressure on the Fed to pivot, weighing further on the greenback and providing scope for GBP/USD to extend gains toward key resistance zones.

Technical Landscape for GBP/USD

Sterling’s rebound has positioned GBP/USD close to the 100-day SMA at 1.3450, with the 20-day and 50-day SMAs aligned around 1.3483–1.3484. A breakout above 1.3489 could unlock a move toward the 1.3500 handle, though failure to hold above 1.3400 risks exposing the 1.3330 support once again. The RSI sits in neutral territory around 42, showing limited buying pressure, but price action indicates near-term momentum has shifted in favor of the bulls.

Relative Performance Against Other Majors

Sterling’s weekly performance shows it as the strongest against the Japanese yen, with a 0.18% gain, while it has slipped against the US Dollar and euro. The GBP/USD pair’s recovery toward 1.3440 contrasts with ongoing weakness in gilt markets, where borrowing costs continue to challenge fiscal credibility. Against the euro, GBP eased 0.23%, while it lost 0.42% versus the Australian dollar, showing that sterling’s resilience is concentrated in the dollar cross.

Investor Sentiment and Risk Outlook

Despite the recovery, the broader outlook for GBP/USD remains fragile. Investors remain concerned about the UK’s fiscal path as bond yields linger near multi-decade highs. Across the Atlantic, weakness in US jobs data is fueling rate cut bets, but the dollar’s safe-haven bid remains firm amid global trade disputes and uncertainty surrounding tariffs. Traders are positioning for heightened volatility ahead of the Bank of England’s policy testimony and the upcoming US Nonfarm Payrolls report, both of which will dictate whether the pair sustains momentum above 1.3440 or resumes its slide toward 1.3300.

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