GBP/USD Price Forecast - Pound to Dollar Holds 1.3540 as Pound Resists Dollar Strength After US Jobs Shock

GBP/USD Price Holds 1.3540 as US Jobs Shock Meets Sticky UK Inflation

The pound-to-dollar pair GBP/USD is trading around 1.3540, marginally lower after testing a daily high of 1.3590, as traders digest a U.S. payroll revision showing the economy created 911,000 fewer jobs in the year through March. Despite the weak labor picture, the dollar held firm because markets still expect the Federal Reserve to cut rates by only 25 basis points in September, with just a 9% probability of a larger half-point cut. This resilience in the greenback capped sterling’s advance, even though UK data showed consumer spending strengthening in August.

UK Inflation and Retail Sales Keep Bank of England on Guard

The British Retail Consortium reported a 3.1% year-on-year spending increase in August compared to 2.5% in July. Food sales jumped 4.7%, while non-food categories rose just 1.8%, showing price-led growth rather than volume strength. With UK inflation already running at 3.8% in July, its highest in 18 months, and forecasts pointing toward a peak of 4%, the Bank of England has little room for easing. The narrow 5-4 decision to lower rates to 4% in August might remain the last cut this year, reinforcing a divergence with the Fed’s trajectory.

US Payrolls Revision and Fed Policy Impact on GBP/USD

The U.S. dollar index has slipped to its weakest level since July 2024, reflecting the pressure from labor market cracks. While the revision highlights softness, it did not materially shift Fed expectations. The market is still pricing in 90% odds of a September 25 bps cut, but the underlying weakness in U.S. employment points to scope for as many as three rate cuts by year-end. This divergence — with the Fed seen easing while the BoE remains cautious — underpins medium-term support for GBP/USD, though the dollar’s safe-haven appeal remains strong.

Technical Structure of GBP/USD

The pair has extended its recovery from the September low at 1.3330, climbing above the 50-day SMA and the falling trendline near 1.3550, which is now serving as near-term resistance. Momentum indicators, with RSI holding above 50, suggest buyers are still in control. Bulls aim to reclaim 1.36, aligning with August’s high, before challenging 1.37 and July’s peak at 1.38. On the downside, first support is 1.3500, with deeper levels at 1.3440 and 1.3350. A break below those zones could re-open the door to 1.3250.

Sterling’s Position Against Majors

The pound has shown relative strength this week, up 0.20% against the dollar, 0.14% against the euro, but down 0.48% versus the yen. This performance underscores how sterling is being driven less by UK domestic catalysts and more by external flows and rate expectations. With the UK calendar quiet, traders are focused on Thursday’s U.S. CPI release, which could determine whether GBP/USD sustains its momentum above 1.35 or tests lower supports.

Verdict on GBP/USD

At 1.3540, the pound remains supported by sticky UK inflation and cautious BoE policy, but the pair’s trajectory hinges on U.S. inflation data and Fed clarity. The market is positioned for a 25 bps cut, but a dovish surprise could accelerate sterling’s climb toward 1.37–1.38. Conversely, resilience in the dollar would pressure GBP/USD back toward 1.3440–1.3350. Based on the balance of risks, the call for GBP/USD is Buy on dips, with positioning favoring accumulation above 1.35 while watching for U.S. CPI-driven volatility.

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