Pound Steady as BoE Stays Hawkish on Sticky Inflation

Key Takeaways:

*Inflation remains sticky, delaying BoE rate cuts despite market pricing in an August move.

*The housing market shows resilience, with strong price and transaction gains.

*Trade and geopolitical risks linger, particularly around UK-US steel tariffs.

Market Summary:

The British Pound held firm near recent highs as stronger-than-expected inflation data and cautious optimism around UK-US trade talks supported sentiment. The June CPI print came in at 3.6% year-over-year, above expectations and marking the highest reading since early 2024, while core and services inflation remain stubbornly elevated. The Bank of England has maintained a hawkish hold, signaling reluctance to rush into rate cuts despite market expectations for a 25bps reduction in August.

Sterling drew additional support from a rebound in the UK housing market, with house prices up 3.9% YoY and a notable surge in transaction volume (+25.1% MoM), pointing to underlying demand resilience. Meanwhile, Prime Minister Starmer’s diplomatic outreach to the U.S. has tempered some trade friction concerns, though unresolved steel tariffs and the potential for abrupt policy pivots from a Trump administration remain key risks.

Near-term volatility may persist, especially as global risk sentiment wavers amid geopolitical uncertainty and a softening U.S. dollar. The Pound’s medium-term trajectory will likely hinge on upcoming wage and labor market data, which could determine the timing and scale of BoE policy adjustments. Until then, GBP remains supported by inflation stickiness, housing strength, and modest improvements in global sentiment, though capped by growth concerns and external trade risks.

Technical Analysis

GBPUSD, H4

GBP/USD remains under pressure as the pair struggles to hold above the critical 1.3385 Fibonacci swing low, with recent price action hovering near the base of its retracement structure. The rejection from the 23.6% Fibonacci level at 1.3485 and the continued inability to reclaim key moving averages including the 20, 50, and 100-period SMAs then reflect persistent bearish momentum and a lack of sustained buying interest.

Momentum indicators echo this cautious tone. The Relative Strength Index (RSI) continues to linger near oversold territory at 32, only marginally above the 30-threshold. While this suggests potential for a technical rebound, the absence of a decisive RSI reversal hints that selling pressure remains dominant. Similarly, the MACD remains below the zero line, with a modest bullish crossover forming — but lacking strong conviction as histogram bars remain muted.

Unless GBP/USD decisively reclaims the 1.3485 region that encompasses the 20-SMA and the 23.6% Fibonacci retracement as the path of least resistance remains to the downside. Immediate support lies at 1.3340, with a deeper decline targeting the 1.3250 zone if bearish momentum accelerates.

With sentiment fragile and momentum fading, price action near the 1.3385 baseline will be critical in determining whether the pair is attempting to form a short-term bottom or setting up for further downside continuation.

Resistance Levels: 1.3485, 1.3545

Support Levels: 1.3340, 1.3250