The GBP/USD pair is stable at 1.3437 as the US Dollar makes a slight recovery. The Bank of England (BoE) recently lowered rates by 25 basis points in a split 5-4 vote. This cautious move leads to an 87% chance that rates will remain unchanged in September. There’s speculation about the leadership of the US Federal Reserve. Rumors suggest that Christopher Waller could succeed Jerome Powell in 2026. St. Louis Fed President Alberto Musalem mentions steady economic activity but notes that inflation is not on target, painting a mixed economic picture.

Current Market Sentiment

The GBP/USD pair has not gained traction following the BoE’s rate cut. With an 87% likelihood of rates staying at 4% in September, BoE’s Huw Pill also highlights risks of increased inflation over the coming years. Key UK economic data on the horizon includes Retail Sales, Employment statistics, and GDP figures. In the US, important releases will cover CPI, Retail Sales, PPI, and UoM Consumer Sentiment. The technical outlook for GBP/USD remains neutral to upward, with resistance at 1.3500 and support at 1.3400. Due to the BoE’s recent and closely contested rate cut, the market is filled with uncertainty. The split vote signifies differences in how committee members view the economy, making future policy directions unpredictable, even with an 87% chance of stable rates in September. On the US side, the Federal Reserve is currently taking a wait-and-see approach as it looks for clearer data. July’s US inflation rate was reported at 3.2%, above the Fed’s 2% target, which supports their cautious strategy. The CME FedWatch Tool indicates a 90% probability that the Federal Reserve will keep rates steady at its September meeting.

Trading Strategy and Economic Outlook

At this moment, the GBP/USD pair is trading within a narrow range, finding support around 1.3400 and resistance just below 1.3500. This sideways movement often happens before major economic announcements. The upcoming UK employment and US inflation reports will likely prompt the pair to break out of this range. In this environment of low volatility but high event risk, buying options is a good strategy. We recommend purchasing a strangle or straddle, which can profit from significant price movements in either direction. With one-week implied volatility being low, these options are cheaper to buy before a potential price spike. Looking back, this cautious rate cut from the BoE marks a significant shift after a period of aggressive tightening that began in late 2021. It signals a clear dovish turn, though the split vote indicates that rapid cuts might not be on the horizon. The UK’s most recent CPI data from July showed inflation at 2.1%, just above the target, which contributes to the committee’s divided decision. We should focus on the upcoming economic calendar, especially the US Consumer Price Index and UK Retail Sales figures. These reports will guide both central banks and influence the GBP/USD pair. Any major deviation from expectations will likely trigger the next significant market move. Create your live VT Markets account and start trading now.

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