GBP/USD Rebounds Toward 1.3550 After Powell’s Dovish Shift

The GBP/USD exchange rate staged a sharp rebound after Jerome Powell’s Jackson Hole remarks shifted Fed expectations toward an imminent September cut. The pair jumped from a weekly low of 1.3387 to an intraday high of 1.3548, settling near 1.3499 as U.S. Treasury yields slipped and dollar demand weakened. Fed funds futures now price a 93% probability of a September cut and project more than 50 basis points of easing by year-end. Powell’s acknowledgment of “downside risks to the labor market” outweighed persistent inflation at 2.7% headline and 3.1% core, giving traders reason to pare long-dollar positions.

Divergence Between Fed and Bank of England Policies

The rebound in GBP/USD comes against the backdrop of policy divergence. While the Fed leans toward easing, the Bank of England is expected to keep rates unchanged after UK inflation accelerated. July CPI printed at 3.8%, with the Retail Price Index rising to 4.8%, reinforcing BoE Governor Andrew Bailey’s warnings about “acute challenges” for growth and price stability. This contrast suggests Sterling could remain supported if the Fed cuts rates first while the BoE stays cautious.

Technical Structure and Price Patterns in GBP/USD

On the daily chart, GBP/USD has carved out an inverse head-and-shoulders pattern, a classic bullish reversal signal. The neckline sits near 1.3587; a breakout above this level would clear the path toward 1.3700, while downside support lies at 1.3450 and 1.3400. The pair also trades above its 25-day and 50-day EMAs, confirming that momentum favors the pound despite intermittent profit-taking. Friday’s bullish engulfing candle reinforced the recovery structure, but resistance at 1.3594—the August high—remains the critical barrier for further upside.

Short-Term Risks and Market Drivers

Dollar demand returned briefly in Asia trading, pushing GBP/USD back to 1.3495, though Powell’s dovish tone capped the downside. U.S. New Home Sales fell by 0.6% in July, adding to the case for Fed easing. Upcoming catalysts include the U.S. PCE price index on August 29 and nonfarm payrolls on September 5. A weak print on either could accelerate the dollar’s decline, while sticky inflation risks might revive the Fed’s higher-for-longer stance, reversing gains in Sterling. In the UK, focus turns to the BRC Shop Price Index, which will guide expectations for the next inflation trend.

GBP/USD Outlook

Sterling sits at a pivotal junction, consolidating just below 1.3550 after its best weekly gain in over a month. A decisive close above 1.3594 would unlock upside targets near 1.3787, while a slip under 1.3393 would put 1.3140 back into play. With Powell shifting the Fed toward cuts and the BoE holding firm, the policy divergence is currently Sterling-positive. For now, the market favors further upside in GBP/USD, but execution depends on whether data confirm or challenge the dovish Fed narrative.

That’s TradingNEWS