Sterling Steady as Inflation and Jobs Data Diverge

Key Takeaways:

*Sticky inflation and upside CPI surprise keep BoE cautious, with no clear signal for near-term rate cuts.

*Pound supported by strong UK job growth and improved global risk appetite following the tentative Middle East ceasefire.

*Fiscal uncertainty and dollar strength continue to cap Sterling’s upside amid lingering global funding risks.

Market Summary:

The Japanese yen continued to hover near recent lows on Tuesday as political and economic uncertainties The British Pound held firm this week, climbing back toward recent highs as easing geopolitical tensions and a cautious yet hawkish tone from the Bank of England (BoE) helped anchor sentiment. The tentative ceasefire between Israel and Iran boosted global risk appetite, prompting a rotation out of safe-haven currencies such as the U.S. Dollar and Swiss Franc. While the initial de-escalation supported Sterling, traders remain cautious given the lack of formal confirmation from Tehran and sporadic reports of ongoing unrest, keeping geopolitical risk in play.

On the monetary policy front, the BoE signaled that rate cuts are not imminent, citing persistent inflation risks despite early signs of labor market softening. The latest UK jobs report showed an unexpected rise in unemployment to 4.7%, but job creation remained strong, with 134K new positions added. Meanwhile, wage growth cooled to 5% YoY, aligning with forecasts and offering modest relief to policymakers concerned about inflation persistence.

However, inflation data for June surprised to the upside, with headline CPI rising to 3.6% and core CPI accelerating to 3.7%—both above expectations. The figures reinforce the BoE’s data-dependent stance, with officials likely to maintain a wait-and-see approach as they monitor inflation trends and economic momentum. The central bank remains wary of easing prematurely, especially amid lingering supply-side pressures and uncertain fiscal conditions.

In contrast, the U.S. Dollar stayed broadly supported on the back of upbeat economic indicators. Strong retail sales, lower-than-expected jobless claims, and a surprise jump in the Philadelphia Fed Manufacturing Index all signaled ongoing resilience in the U.S. economy. Political risk also eased after President Trump reaffirmed his support for Fed Chair Jerome Powell, reducing fears of interference in monetary policy and helping stabilize USD sentiment.

Looking ahead, GBP/USD is likely to remain range-bound in the near term, with key directional cues expected from upcoming inflation data and central bank rhetoric. While the Pound is supported by the BoE’s restrictive policy stance and improved global risk appetite, upside potential remains capped by fiscal concerns at home and the ongoing strength of the U.S. Dollar. For now, Sterling remains in a holding pattern—resilient, yet tethered to an evolving macro and geopolitical landscape.

Technical Analysis

GBPUSD, H4

GBP/USD is attempting to rebound after finding support at the key 1.3386 Fibonacci low, with price now pushing above the 1.3440 level and testing the neckline of the prior breakdown structure. This move follows a multi-session decline that saw the pair retreat from the 38.2% Fibonacci retracement at 1.3545. The bounce, while modest for now, marks a potential shift in near-term sentiment but strong resistance looms overhead.

Momentum indicators are beginning to turn constructive. The Relative Strength Index (RSI) has climbed to 48, nearing the neutral 50 line. This recovery from deeply oversold territory signals improving buying interest, though a break above 50 would be needed to confirm a momentum shift. Likewise, the MACD shows early signs of bullish crossover formation, with the histogram printing small but rising green bars and the MACD line inching closer to the signal line and zero axis.

Despite this initial uptick, GBP/USD remains vulnerable below key resistance zones. Price faces an immediate ceiling at 1.3500 which coincides with the 20-period SMA and 23.6% Fib level at 1.3485, followed by heavier resistance at 1.3545. Failure to break these levels could see renewed downside toward the 1.3340 support, and a deeper move may reexpose 1.3250.

Unless the pair establishes a decisive foothold above the 1.3545 level , the current move still risks being a corrective bounce rather than the start of a broader reversal. Price action in the sessions ahead will be pivotal in determining whether this recovery has real momentum or merely reflects short-covering after an extended downtrend.

Resistance Levels: 1.3485, 1.3545
Support Levels: 1.3340, 1.3250