GBP/USD Price Jumps to 1.3645 as Fed Easing and UK Labor Data Fuel Sterling

GBP/USD rallies on UK jobs resilience and Fed uncertainty

The GBP/USD pair extended its climb, trading above 1.3600 after a sharp recovery from its August low near 1.3140. A steady UK labor market added momentum, with the Office for National Statistics reporting unemployment at 4.7% for the three months ending July, unchanged and aligned with expectations. Employment rose by 232,000 compared to a forecast of 222,000, reinforcing demand for sterling. Wages remain sticky at 4.7%–4.8% year-on-year, a dynamic that keeps the Bank of England wary of inflationary pressure. This backdrop supported a strong 3.5% rebound in GBP/USD for September, placing the pair at its highest level in over two months.

Dollar weakness intensifies as Fed cut bets rise

The U.S. dollar has weakened broadly, setting the stage for GBP/USD gains. Markets are pricing in a 96% probability of a Federal Reserve rate cut at the upcoming meeting, with at least two more cuts expected before year-end. Retail sales slowed from 0.5% in July to 0.3% in August, while industrial production printed at just 0.1%, both signaling a cooling U.S. economy. The unemployment rate in the U.S. has risen to 4.3% after the economy created only 22,000 jobs last month, increasing the pressure on the Fed to loosen policy. Treasury yields softened, pushing investors back into risk assets, including sterling, which now outpaces the greenback on yield spreads. The UK two-year gilt to U.S. Treasury note premium has widened from 0.29% to 0.45%, a key driver behind sterling’s strength.

Technical picture favors further GBP/USD upside

Price action has broken decisively above the 20-day and 50-day moving averages since early September, reinforcing a bullish short-term sequence. GBP/USD now trades within an ascending channel that projects potential resistance near 1.3715–1.3750, coinciding with Fibonacci extension levels. On the 4-hour chart, a breakout through 1.3575 triggered fresh bullish momentum, confirmed by price holding above the Ichimoku cloud. RSI has moved to its highest level in over a month, staying above 50 and showing room for continuation. Analysts point to 1.3700 as the immediate target, while a push above 1.3787, the year-to-date high, could extend gains toward 1.3840 and even 1.3950 if the Fed delivers a dovish surprise.

Sterling performance across majors strengthens case for GBP/USD

Beyond the dollar cross, sterling has shown relative resilience across other majors, amplifying its fundamental case. GBP/JPY secured a daily close above the psychological 200 level, though RSI flagged overbought conditions, suggesting momentum could pause. GBP/CAD posted a bearish engulfing candle at the June high, signaling profit-taking after seven sessions of gains, yet short-term charts point to a possible rebound. GBP/AUD has shed over 3% in 17 days, but divergence on RSI indicates bearish exhaustion. This broad but nuanced performance illustrates that sterling’s primary strength lies against the dollar, where macro divergence is most pronounced.

Key event risks set the tone for GBP/USD traders

The immediate catalysts lie in Wednesday’s dual central bank decisions. The Federal Reserve is widely expected to cut rates, with market attention on Powell’s tone regarding inflation and growth. A dovish statement could open the door to deeper dollar losses, accelerating GBP/USD toward 1.3780. Conversely, the Bank of England is seen keeping policy steady as inflation remains elevated at 3.6% and potentially climbing to 3.8% in August. With UK wage growth sticky and consumer price data stubborn, the BoE’s pause signals divergence from the Fed, a factor likely to sustain sterling’s premium. Additional releases on U.S. capacity utilization, industrial production, and retail inventories will also feed into dollar positioning.

Verdict on GBP/USD: bullish bias sustained, $1.3780 in play

Given the macro divergence, technical breakout, and widening yield spreads, the GBP/USD outlook remains bullish. As long as the pair holds above 1.3570–1.3590 pivotal support, momentum favors a continued rally toward 1.3715–1.3750 and eventually the year-to-date high at 1.3787. A failure to defend support could see a pullback toward 1.3500, but the prevailing bias is tilted higher with central bank divergence driving flows. The decision here leans Buy, with a near-term target zone of 1.3700–1.3780, aligning both technicals and fundamentals with market expectations.

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