GBPUSD:
Sterling rebounded after the weak U.S. labor data, which underpinned broad dollar softness into the end of last week. However, on Monday, August 4, the dollar partially stabilized as attention shifted to the Fed and the Bank of England outlooks. For GBP/USD this creates a more nuanced backdrop: short-term support from the dollar’s correction clashes with a softer domestic impulse for the pound as the BoE is expected to begin easing in the coming meetings.
In the UK, moderating activity and still-elevated—but falling—inflation support the case for gradual rate reductions. Expectations for a BoE turn limit the scope for sustained GBP strength even against a potentially easing Fed: the “expectations differential” on policy rates can cap sterling’s ability to extend a durable uptrend.
On the U.S. side, yields and Fed rhetoric remain pivotal: the more aggressively markets price near-term cuts, the longer GBP/USD can hover above 1.32. Still, given likely BoE easing and sterling’s sensitivity to risk sentiment, today’s base case favors selling rallies with a view toward partially retracing Friday’s gains.
Trade idea: SELL 1.3300, SL 1.3350, TP 1.3200
Origin: FreshForex
