GBP/USD Price Stalls Below 1.3348 as USD Safe-Haven Flows Reassert

Market Sentiment

GBP/USD Reaction to Safe-Haven Flows

Cable found itself under pressure as growing risk aversion propelled investors into the perceived safety of the US Dollar. In mid-week trade, the exchange rate hovered near $1.3289, reflecting a reluctance among market participants to extend gains above the upper boundary of its recent trading band. The specter of potential secondary sanctions on nations dealing with Russia and renewed US-China trade uncertainty weighed heavily on risk appetite, keeping Sterling subdued even as other European currencies underperformed.

USD Strength Amid Political Uncertainty

The Greenback’s resilience was reinforced by a sudden shake-up in the world’s largest economy when President Trump dismissed the official responsible for the monthly payroll report. That report represents a cornerstone of Fed decision-making, and the unexpected personnel change injected volatility into US data reliability. In turn, this capped any aggressive decline in the Dollar, limiting Cable’s upside despite the UK’s positive PMI revisions.

Technical Landscape

GBP/USD Consolidation Below 1.3348

Sterling’s recent rally stalled just beneath the 100-day moving average at 1.3348, forming a technical ceiling that has proven difficult to breach. Friday’s outside range reversal marked a potential trough around 1.3250, where buying interest re-emerged. Yet, the lack of follow-through buying into the early part of this week highlights the pair’s current equilibrium between 1.3255 and 1.3348. The inability to sustain a close above the mid-1.33s underscores the market’s neutral bias on shorter-term charts.

DXY Trend Influence on Cable

The US Dollar Index preserved its ascending trendline support near 98.60, preventing a sharper pullback and indirectly capping GBP/USD advances. With the 50- and 100-period EMAs on the Dollar sloping higher at 98.82 and 98.51 respectively, any Sterling strength must contend with broader DXY firmness. Should the Dollar soften from this trendline, Cable may find additional breathing room to challenge resistance in the low-1.34s.

Fundamental Drivers

Impact of US Jobs Data on Sterling

July’s US Nonfarm Payrolls surprised to the downside with just 73,000 new positions added versus forecasts of 110,000, while the unemployment rate ticked up to 4.2 percent. This cooling in the labour market has lifted the odds of a Federal Reserve rate cut in September to roughly 84 percent. Weaker US data tends to sap Dollar strength, offering Sterling intermittent relief rallies. Yet, each bout of USD weakness has so far been short-lived, suggesting traders remain wary of declaring a sustained Dollar downtrend.

UK Services PMI Supports Sterling

Across the channel, the final July Services PMI was revised marginally higher, indicating that the UK’s dominant services sector continues to expand, if at a slower pace than in June. Forward-looking sentiment measures within the survey climbed, hinting at rising business confidence. That modest uptick in activity underpinned Sterling’s resilience versus the Euro, even as GBP/USD struggles to regain its footing against the Dollar.

Institutional Positioning

Scotiabank’s Neutral Short-Term Stance

Analysts at Scotiabank describe GBP/USD short-term technicals as neutral. They emphasise that Friday’s bullish reversal completes a corrective sequence from July’s lows and that a sustained move above 1.3355 could expose 1.3400. Conversely, a break below 1.3255 risks probing 1.3200. Such razor-sharp focus on a narrow pivot zone illustrates how major institutions are awaiting clear directional cues before significantly tilting their positions.

Central Bank Outlook

GBP/USD at Crucial Monetary Policy Crossroads

Attention now pivots to Thursday’s Bank of England decision, where a 25 basis-point rate reduction is almost universally expected. Governor Bailey’s accompanying forward guidance will dictate Sterling’s next major move. Should the BoE signal a path of further cuts later in the year, GBP/USD is likely to revisit the 1.32 area. Alternatively, any suggestion that the easing cycle is near its end could ignite a bullish reprieve, particularly if dovish Fed comments from policymakers Susan Collins or Lisa Cook fail to dent the Dollar.

Having dissected the technical patterns, fundamental shifts, institutional biases, and central bank calendars without leaving any data unexamined, a cautious stance emerges. While Sterling shows sporadic spurts of life on relief rallies, the overarching downtrend since mid-year remains intact. Patience is key until a decisive breakout materialises beyond 1.3355 or a breakdown under 1.3250.

On balance, a Hold recommendation for GBP/USD is prudent at current levels.

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