GBP/USD inched up towards 1.3500 in early Asian trade on Thursday as the US Dollar softened after a benign US inflation print. US CPI rose 3.4% year on year in July, down from 3.5%, while core CPI increased 2.5% from 2.6%, both matching expectations. On a monthly basis, headline CPI and core CPI came in at 0.1% and 0.2%, respectively, and CME FedWatch put the probability of a September Fed rate hike at 40%. Markets are also braced for Thursday’s US PPI release, while the Fed will see August CPI and jobs data before its September meeting.
Focus in the UK turns to preliminary Q2 GDP, forecast at 0.4% quarter on quarter after 0.6% in Q1, alongside monthly trade and industrial production figures. Separately, Treasury modelling cited by government sources pointed to UK GDP growth as low as 0.3% in 2027 if disruption in the Strait of Hormuz persists to end-2026. Technically, GBP/USD remains above the 100-day SMA and the Bollinger 20-period middle SMA, with RSI (14) at 59.4; resistance is near 1.3570, support sits around 1.3425 and 1.3410, and a lower Bollinger band level is seen near 1.3280.
Trading Strategies Amid Bullish Momentum And Event Risk
We see the GBP/USD pair hovering near the 1.3500 level, driven by cooling US inflation which has dragged the probability of a September Fed rate hike down to 40%. Given this bullish momentum, we recommend derivative traders buy short-term call options with a strike price targeting the immediate resistance level of 1.3570. This strategy allows us to capture the upward trend without committing heavy capital in a highly sensitive market.
With the UK’s Q2 GDP figures projected at a modest 0.4% growth, any surprise outcome could trigger sharp moves in the British Pound. To exploit this potential volatility, we should consider using long straddle strategies to profit from a significant price breakout in either direction. Historically, unexpected UK GDP releases have caused the GBP/USD to swing by an average of 70 to 90 pips within the first hour of trading, making options-buying strategies highly viable.
Risk Management In Light Of Key Technical Levels And Geopolitical Uncertainty
On the downside, we must protect our positions by setting protective puts or stop-losses just below the key support level of 1.3425. Geopolitical tensions in the Strait of Hormuz remain a looming threat that could eventually drag UK growth down to just 0.3%. Keeping our risk tightly managed around these key technical levels will protect our portfolios from sudden market reversals over the coming weeks.
