GBP/USD (Cable) Faces Crossfire Between Diverging Rate Paths and Fading Momentum
Short-Term Dollar Strength Pressures GBP/USD From 1.3600 Resistance Zone
The recent rally in GBP/USD lost steam near 1.3600, with the pair now retreating to 1.3548, shedding 0.24% on the session as U.S. macro data unexpectedly favored the dollar. A sharper-than-forecast drop in U.S. initial jobless claims to 217,000, along with a robust Services PMI at 55.2, halted the pound’s three-day advance. Despite weaker Manufacturing PMI (49.5), the U.S. macro backdrop showed enough resilience to trigger a repricing in Fed expectations, paring the probability of additional cuts and amplifying the greenback’s interest rate advantage. As it stands, the Fed is expected to remain on hold, while markets now assign an 80% chance of a 25-bps rate cut by the Bank of England in August. This widening policy divergence is reinforcing the downside bias for GBP/USD.
BoE Rate Cut Odds Soar on UK Labor Weakness and Mixed PMI Data
S&P Global’s flash UK PMIs for July indicated sluggish momentum. Services activity slowed from 52.8 to 51.2, while Manufacturing PMI dipped to 47.9, remaining in contraction. Employment metrics revealed the steepest pace of job shedding in five months. Markets now expect at least one rate cut in August, with additional easing likely by year-end. Despite securing trade agreements with both Japan and the U.S., Britain’s structural weakness—exemplified by a surge in government borrowing to the second highest June level since 1993—is overshadowing these wins. Fiscal tightening and talk of autumn tax hikes only add pressure on consumption and investment. These deteriorating fundamentals are feeding into dovish BoE sentiment, reinforcing downside risk in sterling.
GBP/USD Technical Signals Point to Overhead Barrier at 1.3600
Technically, GBP/USD was rejected at 1.3588–1.3600, a confluence of horizontal and descending trendline resistance. The 20-day SMA at 1.3555 initially provided support, but the pair has now slipped beneath it. A daily close below 1.3515, the low from July 23, would confirm a bearish engulfing pattern, exposing downside targets at 1.3500, 1.3402, and potentially 1.3369—the low from June 23. On the intraday chart, momentum has stalled. The RSI prints at 68.90, hovering near overbought territory, and price has begun forming lower highs. If bulls lose grip above the 50-SMA at 1.3459, a deeper retracement becomes likely before any resumption of trend.
Pound Holds Resilience Against Global Peers, But Dollar Reclaims Top Spot
Despite recent weakness, the British Pound outperformed all majors except the U.S. Dollar this week. GBP was +0.87% against USD, while falling -0.43% vs EUR, -0.24% vs JPY, and flat versus CHF. The risk rally following Trump’s Japan trade announcement gave sterling a temporary lift, but that momentum is fading as bond traders price in relative rate differentials. U.S. yields are stable. UK gilts are rallying. That inversion is feeding a realignment in currency flows, especially as U.S. economic data surprises to the upside while UK indicators stagnate.
Next Data Triggers: UK Retail and U.S. Durable Goods Will Set Short-Term Tone
Markets are bracing for UK Retail Sales on July 25, and U.S. Durable Goods Orders ahead of the July 30 FOMC decision. If UK retail disappoints in tandem with soft labor data, expectations for deeper BoE easing could build. U.S. data that stays firm will push GBP/USD further toward the 1.3400 handle. Barring a major surprise, there’s no near-term catalyst to break through 1.3600 resistance. Rate spreads and macro divergences favor continued selling on rallies.
Verdict: BEARISH – SELL GBP/USD On Rejection Near 1.3600 Resistance
Momentum has stalled. Rate differentials are widening against the pound. UK macro trends—from employment to services activity to public borrowing—are weakening. Meanwhile, the U.S. economy continues to show resilience, reinforcing the greenback's advantage. With GBP/USD unable to sustain gains above 1.3588, and repeated rejections near 1.3600, the path of least resistance is lower. Selling on failed rallies offers the best risk-reward. Next support zones are 1.3515, 1.3459, and ultimately 1.3369. Only a sustained break above 1.3600 would negate this bearish view.
