GBP/USD Price Forecast: Rally pauses below 1.3700

The British Pound (GBP) trades marginally higher against the US Dollar (USD) at around 1.3640 during the European trading session on Tuesday, even as the US Dollar Index (DXY) edges up, indicating strength in the British currency. At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades slightly higher to near 99.10. The Pound Sterling gains despite market experts seeing the Bank of England (BoE) holding interest rates steady in the near term. UK inflation surprise limited as BoE pricing eases. Analysts at Danske Bank note that UK inflation data for July were broadly in line with expectations, with headline CPI rising to "2.9% y/y (cons: 2.9%, prior: 2.6%), mainly driven by the 13% increase in the Ofgem energy price cap from 1 July." They highlight that "core inflation was slightly higher than expected at 2.6% y/y (cons: 2.5%, prior: 2.6%)," while "services eased in line with expectations to 3.4% y/y (cons: 3.4%, prior: 3.6%)." According to Danske, the combination of this inflation print and "yesterday's weak labour market data" has "taken the top off BoE pricing for the remainder of the year." Meanwhile, the US Dollar trades higher against its other peers as investors fear that fresh United States (US) sanctions on Iran could lift oil prices higher and eventually US Treasury Yields. GBP/USD trades at 1.3640, maintaining a bullish near-term bias, with price holding above the 20-day Exponential Moving Average (EMA) at 1.3531, which reinforces an underlying supportive structure after the recent advance. The Relative Strength Index (14) near 69 suggests strong upside momentum, though it is flirting with overbought territory, hinting that gains could become more gradual if buyers pause ahead of fresh catalysts. On the downside, immediate support is seen at the 20-day EMA around 1.3530, where a break would expose a deeper correction toward prior lows not visible in the current indicator set. As long as GBP/USD remains above this moving average, the broader constructive tone is likely to persist, with any shallow pullbacks viewed as corrective within the ongoing uptrend. Strategists at Scotiabank describe the current technical backdrop for GBP/USD as "solidly bullish," noting that after a period of range trading and "two tests of 1.3150 (April and June)," the pair now appears better poised to advance. They argue that "a sustained push above 1.3650/60 implies potential for an extension towards the 1.41 zone over the balance of the year," underscoring their view that the underlying trend dynamics continue to favour further Pound appreciation. (The technical analysis of this story was written with the help of an AI tool. Know more.) The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE). The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, ma