GBP/USD Holds Near Three-Week Highs as Soft US Payrolls Reshape Fed Bets

GBP/USD holds near 1.3500 after the payrolls shock

Sterling is consolidating just under the 1.3500 handle, sitting at its best levels in roughly three weeks after a sharply weaker-than-expected US payrolls report knocked the wind out of the dollar earlier this week. GBP/USD traded as low as 1.3300 in the wake of the July 30 Bank of England decision before rebuilding steadily into August, and the pair is now testing the top of that recovery range.

Technical analysis

On the 30-minute chart, price is stacked above its short-term moving averages, with the faster reads sitting above the slower ones in a clean bullish sequence. That alignment points to intact short-term momentum rather than an exhausted move. The rally from the July 30 low near 1.3300 was sharp and mostly one-directional into the 1.3550 area in early August, followed by a shallower pullback toward 1.3395 and a fresh push back toward the highs this week.

1.3550 is the level that matters most on the upside. It capped the early-August spike and a clean break and hold above it would open the door toward 1.3600 and the broader multi-month trendline. On the downside, the first cushion sits at 1.3480, with a more meaningful support band at 1.3440 where the pair based before its latest advance. A slip back under 1.3300 would undo the entire post-BoE recovery and shift the near-term bias back in the dollar's favor.

Fundamental analysis

The dominant driver this week has been the US labour market, not UK-specific news. A non-farm payrolls report that came in materially weaker than expected prompted traders to pull forward and enlarge their expectations for Federal Reserve rate cuts, and the dollar sold off broadly against G10 currencies as a result. That single data point has done more to move GBP/USD than anything out of London recently.

The Bank of England's July 30 decision is now old news for price action, but it remains the reference point for the pair's recent range: the initial dip to 1.3300 came on decision day, and everything since has been a recovery built on dollar weakness rather than fresh sterling-specific strength. Lingering Middle East tension and choppy headlines around Iran talks have added intraday noise and kept demand for the dollar as a haven from occasionally offsetting the bearish payrolls reaction, but they have not been enough to stop the broader drift higher in GBP/USD.

What to watch next

With the pair pinned between 1.3480 support and 1.3550 resistance, the next directional move likely hinges on incoming US data and Fed commentary rather than anything domestic. A dovish tone from Fed officials or another soft print would favor a break toward 1.3600, while a rebound in US yields could easily send GBP/USD back toward the 1.3440/1.3400 zone. Traders should treat the current stall as a decision point rather than a top or a bottom.