Sterling has been one of the best-performing major currencies against the US dollar over the past five trading sessions. At the time of writing, GBP/USD has gained 0.38%, outperforming most peers, while USD/CAD recorded a 0.56% loss over the same period. The pound's relative strength reflects a divergence in monetary policy expectations, with the Bank of England maintaining a comparatively hawkish stance even as markets scale back bets on further Federal Reserve tightening.

The pair remains in a short-term uptrend above the 1.3479 support level after breaking above its medium-term descending trendline following the latest US Non-Farm Payrolls (NFP) release.

Macro Drivers: Inflation Trajectory vs. Fed Pricing

Market sentiment remains closely tied to incoming inflation data as investors assess whether the Federal Reserve will resume rate hikes later this year. Following recent mixed labour market signals, pricing for the September FOMC decision sits close to a coin toss. Based on the latest data from the CME FedWatch tool, the Fed funds futures market is pricing only a 48.1% probability of a 25-basis-point hike, down from approximately 70% a week earlier. The upcoming Consumer Price Index report therefore takes on outsized importance, as it represents one of the final major data points before the Fed's communication blackout period ahead of the September decision.

Hot CPI scenario (Core YoY > 2.5%): A surprise to the upside, driven by core goods price pass-throughs, would likely trigger a hawkish repricing in US short-term Treasury yields. This would provide a strong tailwind for the US Dollar Index, exposing GBP/USD to a rapid downward repricing toward the 1.3400 psychological level, which also sits near the 20- and 200-day moving averages.

Soft CPI scenario (Core YoY ≤ 2.5%): Confirmation of easing services inflation and softer shelter costs would give the Fed additional flexibility. A softer dollar would reinforce risk appetite, potentially pushing GBP/USD above near-term hurdles toward multi-month highs. Such an outcome would also widen the perceived policy gap between a cautious Fed and a more resolute BoE, a dynamic that has underpinned cable demand in recent sessions.

Technical Outlook: Ascending Channel After Bullish Breakout

GBP/USD cleared a significant medium-term hurdle after staging a bullish breakout following the US NFP release on Friday, 7 August 2026, moving above its former descending trendline resistance that originated from the 28 January 2026 high, which also marked the 52-week high.

The pair continues to oscillate within a minor ascending channel in place since the 29 July 2026 low of 1.3279, with a current bullish momentum reading on the hourly RSI. These observations suggest that GBP/USD is trading within a short- to medium-term uptrend.

The 1.3479 level serves as the key short-term pivotal support. Holding above it would maintain a near-term bullish bias, with the next intermediate resistances at 1.3547, 1.3580, and 1.3643, the latter also being a Fibonacci extension level.

Conversely, an hourly close below 1.3479 would invalidate the minor bullish impulsive up-move sequence, triggering a corrective decline toward the next intermediate supports at 1.3440 and 1.3400.

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