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GBP/USD Rebounds as US Inflation Fails to Derail Fed Rate-Cut Expectations
Traders' Opinions
Summary:
GBP/USD recovers from early losses as US inflation data reinforces expectations of a Fed rate cut, while traders eye the Bank of England’s upcoming policy decision.
Buy
TradingGBPUSD
EXP
1.35650
Entry Price
1.38000
TP
1.35000
SL
1.35655 +0.00086 +0.06%
0
Point
Flat
1.35000
SL
CLOSING
1.35650
Entry Price
1.38000
TP
The British Pound (GBP) staged a notable rebound against the US Dollar (USD) on Thursday, reversing earlier losses and trading around 1.3540 at the time of writing, after touching intraday lows near 1.3493. Market participants digested a mixed US inflation report, which, despite marginally exceeding forecasts, failed to undermine expectations of a Federal Reserve (Fed) interest rate cut next week.
The US Consumer Price Index (CPI) for August showed a 0.4% month-on-month increase, slightly above the consensus forecast of 0.3% and an acceleration from July’s 0.2%. The uptick was largely driven by rising energy costs and higher shelter expenses, highlighting persistent pressures in select sectors of the economy. On an annualized basis, headline CPI held steady at 2.9%, in line with expectations but slightly higher than the previous 2.7%.
Core CPI, which strips out volatile food and energy components and serves as a closer guide to the Fed’s policy stance, rose 0.3% month-on-month and 3.1% year-on-year. Both figures matched forecasts and July’s readings, underscoring that underlying inflation pressures remain contained despite headline volatility.
While the headline CPI surprised to the upside, the stable core print reinforced the market’s view that the Fed is likely to implement a modest 25 basis point rate cut during its upcoming monetary policy meeting. Recent dovish commentary from Fed officials, coupled with softer-than-expected labor market data and a weaker Producer Price Index (PPI), has strengthened expectations for a calibrated easing of policy rather than aggressive action.
CME’s FedWatch tool reflected this sentiment, showing a 94% probability of a 25 basis point rate reduction in September, up from 90% prior to the inflation release. Traders continue to fully price in three rate cuts by the end of 2025, signaling confidence that disinflationary trends are broadly intact.
Attention is now turning to the Bank of England (BoE), which is scheduled to announce its policy decision on September 18, just one day after the Fed. Analysts widely anticipate that the BoE will leave the Bank Rate unchanged at 4.00%, having already delivered five cuts earlier in 2025. The contrasting policy trajectories — with the Fed leaning toward easing while the BoE maintains its rate — could provide near-term support to GBP/USD. Narrowing US-UK rate differentials typically benefit Sterling, adding fuel to the recent rebound in the currency pair.
Technical Analysis
From a technical standpoint, GBP/USD has exhibited bullish momentum following the US CPI release. The pair is trading above its short-term supportive bias line and the 50-day exponential moving average (EMA50), suggesting continued upside potential. The price is preparing to challenge critical resistance at 1.3585, reflecting dominance of the prevailing bullish trend in short-term trading.
The Relative Strength Index (RSI) is signaling positive momentum despite approaching overbought territory, reinforcing the short-term bullish bias. Immediate support is now observed at 1.3543, with additional layers at 1.3524 should the pair face downward pressure. On the upside, resistance is noted at 1.3582 and 1.3602, levels that could serve as critical testing points for further Sterling strength.
TRADE RECOMMENDATION
BUY GBPUSD
ENTRY PRICE: 1.3565
STOP LOSS: 1.3500
TAKE PROFIT: 1.3800
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