The GBPUSD pair has seen recent gains due to a dovish tone from the Federal Reserve and a more aggressive stance from the Bank of England (BoE). The US dollar has weakened after the latest Non-Farm Payroll (NFP) report, with markets now anticipating a 58 basis point easing by the end of the year, up from 35 basis points. Now, all eyes are on the upcoming US Consumer Price Index (CPI) report. Recent comments indicate a potential rate cut in September, unless high inflation data or a strong September NFP report suggests otherwise. For the GBP, the BoE has made a hawkish cut, reaching a majority after two voting rounds—marking a first. Inflation forecasts have been adjusted upwards, and the BoE acknowledges that inflation continues to be a major concern.

Technical Overview

Technically, GBPUSD is close to a significant downward trendline, with sellers targeting a drop to the 1.3140 level. On the 4-hour chart, a minor upward trendline supports bullish momentum. Key upcoming events include UK employment data and US CPI, along with other reports like UK GDP and US Retail Sales throughout the week. Attention will also be on further comments from the Fed after the US CPI figures. The pound is rising against the dollar due to different signals from the central banks. The recent NFP report in the US led the markets to expect more rate cuts from the Federal Reserve. At the same time, the Bank of England is showing concern about inflation, driving upward pressure on the pair. The BoE’s cautious approach makes sense when we look at the data from August 2025. UK core inflation hasn’t fallen significantly and was at 3.5% for July. Additionally, second-quarter wage growth was strong at 5.8%. Historically, core inflation has been above 3% since 2021, making the BoE’s job particularly challenging.

Market Sentiment and Strategies

Conversely, the dollar has weakened since the July Non-Farm Payrolls report showed only 150,000 jobs added—below expectations. Now, the markets are pricing in 58 basis points of Fed cuts by year’s end, a significant change from just weeks ago. The upcoming US CPI report on August 12th is expected to be a crucial event that could influence this outlook. As the pair tests a major trendline, traders should consider strategies to manage risk during this data-heavy week. Purchasing call options with a strike price above the current trendline could be a strategy to target a breakout towards the 1.3590 level. This allows potential upside while limiting the maximum loss to the premium paid. On the other hand, traders who believe the trendline will hold or expect a surprisingly high US inflation report may opt for put options. This would position them for potential rejection at this critical technical level and a decline back toward the 1.3140 support. This strategy also limits risk if the pound keeps rising unexpectedly. Create your live VT Markets account and start trading now.

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