GBP/USD extended its advance for a ninth straight session, trading around 1.3390 in Asian hours on Tuesday as the US Dollar weakened with markets paring back expectations for Federal Reserve rate rises in July and September. The reassessment followed a softer US employment update showing fewer jobs added in April, May and June than Wall Street expected. Separately, lower crude prices after an OPEC+ output increase and a US–Iran peace deal eased inflation pressure and reduced the perceived need for a more forceful Fed stance.
On the technical front, the pair has logged eight consecutive higher daily closes, rising from roughly 1.3150 to test its 200-day Exponential Moving Average, with the 50-day EMA just ниже it and 1.3400 acting as near-term resistance. On Monday, it held near 1.3350 during the London session before pushing higher into the afternoon to pause just short of 1.3400. Moves in response to comments from a hawkish Fed governor and firmer US services figures were limited.
US Dollar Weakness and Policy Divergence
We are seeing the US Dollar weaken as recent economic data disappoints. The US jobs report for June, released last week, showed the economy added only 150,000 jobs against forecasts of 200,000, while wage growth also slowed. This has led markets to believe the Federal Reserve will pause its rate-hiking cycle.
Current futures markets are pricing in less than a 20% chance of a rate hike at the Fed’s meeting later this month. In contrast, the Bank of England is dealing with stickier core inflation, which is holding above 4%, making a UK rate cut unlikely in the near term. This growing policy divergence between the two central banks is supportive for the Pound Sterling.
Trading the Cable Rally
The GBP/USD pair has shown strong momentum, breaking above its 50-day moving average and now trading around 1.2850. The dollar’s inability to rally, even on days with otherwise positive news, suggests its upward trend is exhausted for now. We see this as a sign that the path of least resistance for Cable is higher.
For traders, this points toward positioning for further GBP/USD strength in the coming weeks. We believe buying call options is a prudent strategy, as it allows us to capture potential upside while clearly defining our maximum risk. We are targeting a move towards the 1.3000 psychological level by mid-August.
This situation is reminiscent of late 2023, when weakening US data led to a sharp dollar sell-off and a significant rally in the Pound. With a key US inflation report due next week, implied volatility in options may offer good value. This presents an opportunity to structure trades that could benefit from a continued rise in the pair.
